ALJDEC decisions subject to certification as final

06F-M2267-ROC · Registrar of Contractors · 2007-01-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 25, 2006 and January 17, 2007 APPEARANCES: Gary Michael Smith appeared on behalf of Complainant Lavender and Old Lace; Curtis Charles Russell, Respondent’s director, qualifying party and authorized representative, appeared on behalf of Respondent CC Russell Asphalt and Concrete Inc. ADMINISTRATIVE LAW JUDGE: Marianne T. Bayardi _____________________________________________________________________ The issue presented by this matter is whether Respondent CC Russell Asphalt and Concrete Inc. is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order: FINDINGS OF FACT 1. Respondent CC Russell Asphalt and Concrete Inc. (“Respondent”) is the holder of a Class A-14 License (No. 155205) issued by the Registrar of Contractors (“ROC”). Curtis Charles Russell (aka CC Russell) is Respondent’s director, qualifying party and authorized representative. 2. Complainant Lavender and Old Lace (“Complainant”) is the owner of commercial property located at 1742 North Lindsay Road, Mesa, Arizona (the “Property”). Carol Tipotsch owns Complainant. 3. On September 7, 2004, Complainant and Respondent entered into a lump sum contract for Respondent to construct a parking lot at the Property, including grading, preparation work, and materials. The total contract price was $26,775.00. As required by the contract, Complainant paid Respondent a deposit of $10,000.00. The balance was due upon completion of the contracted work. The parking lot construction was related to a larger construction project Complaint was undertaking at the Property involving commercial structures thereon. Prior to entering into its contract with Respondent, Complainant retained the services of David Smith to serve as managing general contractor for the entire construction project. As a result, Mr. Smith, among other things, served as Complainant’s agent in connection with Respondent and its work at the Property. 4. At the end of September, 2004, Respondent began its work at the Property but did not complete preparation or begin paving the parking lot. Respondent returned to the Property and performed additional work in November, 2004, including applying approximately 600 tons of ABC to portions of the future parking lot. Respondent did not spread the ABC over the entire area intended for the parking lot. The parties disagree over the cause of Respondent’s failure to complete the contracted work at the Property. Complainant had poured-in-place curbs installed by a different contractor throughout approximately 75% of the parking lot area. Respondent contended that the contract called for it to place extruded curbs after the parking lot paving was completed. The parties did not execute any change order related to the curbs nor did either party request a change order following the installation of the poured-in-place curbs. 5. The parties disagree over the nature of the contacts between them following Respondent’s work stoppage. It is undisputed, however, that Respondent has performed no additional work at the property, since approximately November, 2004, and that the parking lot remains incomplete to date. 6. On May 17, 2006, Complainant filed the instant Complaint against Respondent with the ROC.[1] The Complaint alleged, in pertinent part: Contractor started project, received payment for work done. Has repeatedly failed to follow through on promises to finish the project. Approximately 60% of the project needs to be completed.

7. On May 31, 2006, Complainant requested the instant administrative hearing. 8. On June 29, 2006, the ROC issued Citation and Complaint No. M06- 2267 alleging that Respondent had violated A.R.S. § 32-1154(A)(1) and (A)(7). 9. On July 10, 2006, Respondent filed a written response to the Citation and Complaint. 10. The instant administrative hearing began on October 25, 2006. The parties did not complete the presentation of evidence on that date. As a result, the hearing continued on January 17, 2007. The parties completed the hearing on that date. 11. At hearing, Complainant maintained that Respondent failed to perform the contracted work and abandoned the contract, leaving Complainant with an incomplete parking lot. Moreover, due to the current state of the parking lot, Complainant has been unable to obtain a certificate of occupancy for the Property and has been unable to conduct business at the Property. 12. Respondent contended that it was ready to perform but was instructed not to by Complainant or Mr. Smith on several occasions. Respondent additionally asserted that the Property remains in a state that prohibits it from performing the rest of the contracted work in two respects. First, Respondent contended that the grades were not right and that any future parking lot would not drain properly. Additionally, Respondent contended both that the presence of the poured-in-place curbs in part of the parking lot and the absence of poured-in-place curbs in the remainder of the parking lot precluded it from finishing the contracted work. 13. Ms. Tipotsch testified at hearing that Complainant paid Respondent the required $10,000.00 down payment on September 9, 2004 by check, which Respondent cashed. Respondent was given plans and prepared the contract that the parties executed. While Respondent commenced work at the site, including grading and the application of ABC, Respondent did not finish the contracted work. Ms. Tipotsch testified that she asked Respondent many times to return and complete construction of the parking lot, but that it has failed to do so. Ms. Tipotsch testified further that, at the end of September, 2004, the other construction work in the vicinity of the parking lot was complete and that the curbs were completed by the end of October or the beginning of November, 2004. 14. Mr. Smith testified that Respondent prepared approximately two thirds of the parking lot. Mr. Smith testified that all required curbs were completed by the first half of November, 2004. According to Mr. Smith, Respondent stopped its work in November, 2004 because it ran out of ABC. Mr. Smith also testified that although the site was balanced, that is, it did not require the import of fill or removal of excess material, Respondent graded improperly and did not make use of this “balance.” As a result, the 600 tons of ABC were inadequate as Respondent left it as little as three inches deep in some spots and as much as 14 inches deep in others. The contract called for a uniform application of ABC, four inches deep. Respondent requested that Complainant pay for the purchase of additional ABC, in spite of the fact that the contract was “lump sum.” Mr. Smith acknowledged that Respondent had to wait to do a portion of its work until a drainage pipe was installed under the parking lot; however, Mr. Smith intimated that the wait did not cause undue delay. Complainant was required to import fill for the western portion of the parking lot due to Respondent’s failure to properly grade, but that section continues to lack required ABC. 15. Mr. Smith testified that the grading in the area of the curbing was “close enough” to the required elevation to allow the installation of the curbs, with some minor elevation modifications. The elevation of the curbs has been approved by the City Inspector. Moreover, once the parking lot is fully installed, it will drain as intended.[2] Additionally, Mr. Smith indicated that he had many conversations with Mr. Russell about Respondent returning to the Property to complete the contracted work. According to Mr. Smith, Mr. Russell sought more money from Complainant above the contracted price to complete the job. As of mid-November, 2004, at the latest, no condition at the Property impeded or prevented Respondent from returning to the Property and completing the construction of the parking lot. In addition, Respondent was relieved of its obligation to install the curbs, because other contractors performed that work, but Complainant did not seek to decrease Respondent’s pay in any way as a result thereof. Complainant’s installation of the curbs did not adversely affect Respondent’s ability to perform the remaining parking lot construction tasks according to Mr. Smith. 16. Mr. Russell testified that Mr. Smith told him the area for paving and that Mr. Russell “took him at his word”, intimating that he did not check the area himself before preparing Respondent’s proposal. Mr. Russell testified that Respondent performed work at the Property at the end of September, 2004 and that Mr. Smith told Respondent that they (Complainant/Mr. Smith) were not ready for the parking lot yet but that Mr. Smith would call Mr. Russell when they were ready. On approximately November 1, 2004, Ms. Tipotsch called Mr. Russell and informed him they were ready. Respondent went to the Property and learned, for the first time, that Complainant had changed from extruded curbs to poured-in-place curbs and that the curbs had been installed in all but the western portion of the parking area. As a consequence, Respondent prepared approximately 75% of the parking lot. According to Mr. Russell, Mr. Smith again informed him that Mr. Smith would call Respondent when they were ready to proceed. Mr. Russell testified that on at least two occasions in early 2005, Ms. Tipotsch called Mr. Russell to inform him they were ready only to have Mr. Smith tell him, upon arrival, that they were not. Mr. Russell acknowledged that, in the summer of 2005 and thereafter, he asked Mr. Smith to purchase the materials for paving because the cost of materials had increased substantially in price since the parties entered into the contract. No such agreement was reached. Mr. Russell contended that Respondent cannot put in the parking lot because the material Mr. Smith put in is not suitable as a base. Moreover, he asserted in a conclusory fashion that the parking lot would not drain. 17. Mr. Russell acknowledged that, although the contract does not have an expiration date, it is generally understood that performance is required within three to four months. Mr. Russell also acknowledged that, beyond his own contention, Respondent did not have any physical evidence that the site was not prepared and ready to receive Respondent’s work in late 2004. Mr. Russell testified that the cost to finish the job today is nearly double what it was in 2004 due to an increase in material costs. 18. Barry Richardson, a paving contractor for approximately 30 years and a 50 year friend of Mr. Russell’s, testified at hearing that a parking lot can be poured before poured-in-place curbs are poured, though commonly the poured-in-place curbs are completed first. Mr. Richardson acknowledged that he is not aware of any industry standard that dictates which should be installed first. Mr. Richardson testified that he saw obvious obstructions to drainage in the form of sidewalks and berms. Mr. Richardson indicated that he looked for subterranean drains, but did not observe any. 19. Based on the weight of the credible and probative evidence, the Administrative Law Judge finds Respondent failed to complete the construction of the parking lot. Respondent’s own witness acknowledged that the lack of poured-in-place curbs did not prevent installation of the parking lot. With respect to the allegation that the parking lot will not drain, Mr. Smith testified credibly that the subterranean drain is in place and that the necessary cuts will be made in the curbs after the parking lot is complete. Respondent failed to sufficiently controvert Complainant’s contentions with respect to drainage and further failed to show, through probative and credible evidence, that it cannot go forward in fulfilling its contractual obligation to construct the parking lot. CONCLUSIONS OF LAW In this proceeding, Complainant bears the burden to prove, by a preponderance of the evidence, that Respondent is subject to discipline for a violation of A.R.S. § 32-1154(A)(1) and/or (A)(7) as charged by the ROC in its June 29, 2006 Citation and Complaint. See A.A.C. R2-19-119. 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). 3. Under A.R.S. § 32-1154(A)(1), a contractor is subject to discipline for abandoning a contract without legal excuse. The weight of the credible evidence demonstrated that Respondent did not complete the job. Respondent’s claim that it was legally excused from performing under the contract was not supported by the weight of the credible evidence. In the matter of an affirmative defense, the Respondent bears the burden of proof by a preponderance of the evidence. Respondent failed to meet its burden. In view of the foregoing, the Administrative Law Judge concludes that Respondent violated A.R.S. § 32-1154(A)(1). 4. Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . resulting in another person being substantially injured.” The Administrative Law Judge concludes that Complainant established that Respondent committed a wrongful or fraudulent act that substantially injured Complainant. Respondent’s failure to complete the contracted work constitutes said act. Consequently, the Administrative Law Judge concludes that Respondent has violated A.R.S. § 32-1154(A)(7). 5. Based on the foregoing, the Administrative Law Judge concludes that Respondent has violated A.R.S. § 32-1154(A), and that grounds exist to impose discipline against Respondent’s Class A-14 License. RECOMMENDED ORDER On the effective date of the Order entered in this matter, Respondent’s Class A-14 License (No. 155205) will be suspended until the ROC receives written proof that Respondent has completed the contracted work at its sole cost and expense and in a proper and workmanlike manner. If, on or before the effective date of the Order, the ROC has received written proof that Respondent has completed the required work, then no suspension will take place and this Complaint will be closed. In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification. Done this day, January 22, 2007.

______________________________________ Marianne T. Bayardi Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2007, to:

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

By ___________________________

----------------------- [1] Complainant’s Complaint is dated February 24, 2006. However, it is stamped in as received by the ROC on May 17, 2006. [2] Mr. Smith acknowledged that there are areas of the curbs that should be cut out, which currently are not. Mr. Smith indicated that those cut-outs will be made by the concrete company after the parking lot is complete, allowing for drainage into the retention areas.

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