ALJDEC decisions subject to certification as final

06F-L0525-ROC · Registrar of Contractors · 2007-01-03

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 14, 2006 APPEARANCES: Complainant: Brian R. Traub appeared, pro per Respondent: Phil McClanahan, corporate officer and qualifying party, appeared, pro per. ADMINISTRATIVE LAW JUDGE: Brian E. Smith _____________________________________________________________________ Evidence and testimony were presented and, based on the entire record in this matter, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT 1. The matter was originally scheduled to convene for hearing via videoconference from Lake Havasu City at 8:15 a.m. on December 14, 2006 pursuant to the Registrar of Contractors’ Notice of Hearing dated November 3, 2006. On November 29, 2006, Respondent filed a motion for change of venue (“motion”) due to both parties being located in the Phoenix area. On December 8, 2006, Complainant filed a response to the motion wherein it did not object to a change of venue. Thereafter, this tribunal issued its Order Granting Motion for Change of Venue and the matter convened for hearing on December 14, 2006 at 9:00 a.m. in conformance therewith. 2. Complainant Flow Products (“Complainant”) is company doing business in Arizona. Brian R. Traub (“Traub”) is a corporate officer and the owner of Complainant. 3. Respondent Conwest Group Inc. (“Respondent”) is a corporation which holds Arizona Contractors’ License No. 120110 (Commercial Air Conditioning and Refrigeration) issued by the Registrar of Contractors (“ROC”) on December 30, 1996. Michael Scot Mc Clanahan (“Mc Clanahan”) is a corporate officer and the qualifying party for the license. A review of the licensing database maintained by the Registrar indicates that this license was suspended on December 1, 2006 for non-renewal. 4. Complainant filed a complaint with the Registrar of Contractors on June 16, 2006, wherein it alleged that Respondent purchased materials from Complainant for which Respondent never paid. Annexed to the Complaint were copies of invoices Complainant submits remain unpaid. 5. Complainant filed a request for hearing on July 27, 2006. 6. Respondent filed an answer on August 4, 2006 wherein it alleged, inter alia, that (1) it returned all tools loaned it by Complainant and (2) Complainant’s Invoice No. DM000146 dated December 12, 2005 for $1,769.77 is in error. In addition, Respondent asserts it is owed over $1,000,000.00 on the project to which Complainant’s Invoice No. DM000133 obtains and, paragraph 10 of its purchase order to Complainant which sets forth a paid when paid clause, excuses Respondent from paying Complainant until it is paid on the project. 7. Based on Complainant’s complaint, the Registrar of Contractors issued a CITATION AND COMPLAINT in Case No. L06-0525 charging Respondent with possible violations of A.R.S. §32-1154A 7 and 11. 8. Traub testified and submitted Exhibits A through K which were marked, admitted and considered. 9. Mc Clanahan testified and submitted Exhibits 1, 2 and 3 which were marked, admitted and considered. 10. On the testimony and evidence of record, the following is also found: a. Respondent is a subcontractor of Batten and Shaw, the general contractor on the Colorado River Medical Center located in Fort Mohave, Arizona (“project”). (Exhibits A, B and C) b. On or about July 7, 2005, Respondent submitted to Complainant, as vendor, its Purchase Order No. 0407-E-08 Rev. 1 (Exhibit A) for, inter alia, “seismic restraints and hardware as required by the project documents for all ductwork, HVAC piping and equipment, Plumbing piping and equipment, Medial Gas piping and equipment.” [Emphasis in original.] The total of such purchase order was $30,162.00. c. Subsequently, on or about July 14, 2005, Respondent submitted to Complainant its Purchase Order No. 0407-E-08 Rev. 2 (Exhibit B) which specifically stated that its earlier purchase order no. 0407-E-08 Rev. 1 was to be deleted in its entirety due to a mathematical error. The revised purchase order for the same items was reduced by $100.00 to $30,062.00. d. On or about August 24, 2005, Respondent submitted to Complainant its Purchase Order No. 0407-E-26 (Exhibit 3) whereby Respondent ordered 36 SW S R-1A-50 O.D. seismically restrained isolators with outdoor finish (unit price $35.00) and 4 SWSR-1A-150 O.D. seismically restrained isolators with outdoor finish (unit price $35.00) for a total price of $1,400.00. e. On or about September 19, 2005, Respondent submitted to Complainant its Purchase Order No. 0407-E-26 Rev. 1 (Exhibit C), which specifically referenced its Purchase Order No. 0407-E-26 for $1,400.00, and added four (4) seismic Isolators for Exhaust Fan EF-29 at $35.00 each, or a total of $140.00. These two purchase orders totaled $1,540.00 plus freight. f. The back side of Respondent’s Purchase Order specifically states: Vendor hereby acknowledges that any payment of Purchaser is conditioned upon receipt of payment by Purchaser from the Owner or General Contractor and Vendor hereby specifically agrees that if a payment due and owing to Purchaser is delayed for any reason, Purchaser is not obligated to pay the statement of Vendor until after receipt of payment from Owner or General Contractor and that any such delay shall not be considered a breach of this Agreement. Vendor acknowledges that Purchaser’s receipt of payment is a condition precedent to Purchaser’s obligation to pay Vendor. (Exhibit 2)

g. On or about October 7, 2005, Complainant issued its Debit Memo No. DM000133 to Respondent (Exhibit D) which invoiced Respondent $3,700.00 for “Seismic Calc’s [sic] & Restraints per Amber Booth Quote #G50316-1Rev.1 dated 3/23/05. Partial Billing for Engineering work performed in September, 2005.” h. On or about December 12, 2005, Complainant issued its Debit Memo No. DM000146 to Respondent (Exhibit E) which invoiced Respondent $1,769.77 for “Galvanized Steel Stanchions per A/B Drawing #A-63196-4.” i. Complainant further asserts that Respondent owes its $78.00, the cost of a tool (Red cable cutters) lent to Respondent and which Respondent failed to return. Respondent asserts that it returned all five tools Complainant lent it for use on the project. (Exhibit 1) j. McClanahan admitted at the hearing that Respondent owes and will pay Complainant the $3,700.00 due under Debit Memo DM000133. However, McClanahan affirmatively asserting the pay-when-paid clause set forth in its Purchase Order, alleges that such payment is not yet due Complainant because Respondent is owed more than $1,000,000.00 by the project’s owner and/or general contractor and has not yet been paid for the work/materials called for under such Debit Memo. k. Traub testified that he did not believe a party could unilaterally change the terms of a contract by putting language on the back of a document, here, the pay when paid clause contained in Respondent’s Purchase Order. Traub further contends that Respondent should be bound by the provisions of its Debit Memo, i.e., payment is due from Respondent within thirty days. McClanahan, though admitting that its Purchase Orders were not signed by Complainant, asserts that Complainant is bound by such provision because it acted upon the Purchase Orders. l. McClanahan further asserts that Respondent does not owe Complainant the $1,769.77 allegedly due under Complainant’s Debit Memo No. DM000146 as Respondent has previously paid it under its Purchase Order Nos. 0407-E26 and 0407-E26 Rev. 1 (Exhibits 3 and C, respectively) m. McClanahan further testified that Complainant’s Debit Memo DM000146 includes materials only and not any underlying calculations. Conversely, Traub testified that the language regarding the scope of such Debit Memo is limited in its form by its computer and, in fact, is intended to include a reference to underlying calculations for such materials. n. McClanahan admitted that Respondent owes Complainant $78.00 for an unreturned tool. o. As of March 10, 2006, Complainant asserts that Respondent owed it a total of $5,547.77 which included the $3,700.00, $1,769.77 and $78.00 above-referenced in Exhibits D, E and 1, respectively. p. At the hearing, Traub testified that Respondent now owes Complainant $5,797.77 which included the afore-mentioned $5,547.77 plus $250.00 for a lien processing fee.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent with possible violations of A.R.S. § 32-1154A (7) and (11). Those statutory sections require that the holder of a license or person listed on the license shall not commit the following:

7. The doing of a wrongful act by the licensee as a contractor resulting in another legal excuse for the abandonment or refusal.

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 his operations as a contractor when he has the capacity to pay or, if he lacks the capacity to pay, when he has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

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. 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). See also, Culpepper v. State of Arizona, 187 Ariz. 43, 930 P.2d 508 (App. 1996). 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. This tribunal determines and concludes that Complainant failed to establish by a preponderance of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (11) as it pertains to the $3,700.00 claimed owed pursuant to Complainant’s Debit Memo DM000133. Though Respondent admits such amount is owed Complainant, Respondent’s Purchase Order No. 0407-E-08 Rev. 2 sets forth a pay-when-paid provision which constitutes a condition precedent to Respondent’s obligation to pay Complainant for services and/or materials provided to the subject project. Complainant asserts Respondent cannot unilaterally impose such contractual provision upon it and further contends that it is not bound thereby because it never signed the purchase order.[1] It is the “general rule that conditions precedent are not favored in the law and…courts are not inclined to construe a contractual provision as a condition precedent unless such construction is plainly and unambiguously required by the language of the contract. L. Harvey Concrete, Inc. v. Argo Construction & Supply Co., 189 Ariz. 178, 939 P.2d 811 (App. 1997). In this case, the language of Respondent’s Purchase Order is clear and unambiguous as to its delayed responsibility to pay Complainant where it has not been paid by its general contractor. Though Complainant did not sign the purchase order it acted upon it by providing materials and/or services to Respondent thereunder. As a result, Complainant is bound by the purchase order’s express terms. 4. This tribunal further determines and concludes that Complainant failed to establish by a preponderance of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (11) as it pertains to the $1,769.77 claimed owed pursuant to Complainant’s Debit Memo DM000146. Based on the evidence adduced at the hearing, a good faith factual dispute exists between the parties regarding the scope of such Debit Memo, i.e., whether it was for materials and/or services, and whether it had already been paid by Respondent. 5. This tribunal further determines and concludes that Complainant failed to establish by a preponderance of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (11) as it pertains to Complainant’s claim for a $250.00 lien processing fee. 6. It is also determined and concluded that Complainant established by a preponderance of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (11) with regard to the $78.00 owed Complainant for a missing tool. Notwithstanding that this issue was not a part of the original complaint, McClanahan acknowledged at the hearing that such sum was owed. 7. It is further determined and concluded that Complainant failed to establish by a preponderance of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (7). Though McClanahan admitted at the hearing that $78.00 was due Complainant for a tool, the weight of the evidence established that such debt was due to a mutual misunderstanding of the facts by the parties as pertains to tools provided Respondent by Complainant and, therefore, did not constitute a wrongful or fraudulent act on behalf of Respondent. 8. Any dismissal of the instant administrative proceeding must be and is expressly without prejudice to Complainant’s potential rights to pursue available civil remedies for the collection of provable damages for any breach of contract that may be sufficiently established.

RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that, commencing on the effective date of the Order entered in this matter, the Class L-39 license of Respondent be suspended until the Registrar of Contractors receives written proof that Respondent has paid or tendered the sum of $78.00 to Complainant as compensation for referenced tool. IT IS FURTHER RECOMMENDED that the instant Citation and Complaint be dismissed as it pertains to Complainant’s claim for those amounts claimed due under Complainant’s Debit Memo Nos. DM000133 and DM000146, i.e., $3,700.00 and $1,769.77, respectively, and the $250.00 for lien processing fee as set forth in Conclusions of Law 3, 4 and 5 herein.[2] Done this day, December 14, 2006.

_______________________ Brian E. Smith Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2006, to:

Registrar of Contractors Fidelis V. Garcia Legal Department 800 West Washington, 6th Floor Phoenix, AZ 85007

By _______________________

----------------------- [1] It is interesting to note that at the hearing Traub argued that Complainant could not be bound by the pay-when-paid provision unilaterally imposed by Respondent yet affirmatively asserted that Respondent should be held to the terms of Complainant’s debit memos which require payment in thirty days. [2] In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order in this matter will be forty (40) days from the date of that certification.

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