ALJDEC decisions subject to certification as final

06F-M2503-ROC · Registrar of Contractors · 2007-01-09

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 21, 2006 APPEARANCES: Complainant: Zac Scott appeared, pro per. Respondent: Robert Kroener, corporate officer and qualifying party, appeared and was represented by counsel, Raul Garza, Jr. 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. This matter came for hearing at the time, date and place set forth in the Registrar of Contractors’ Notice of Hearing dated November 9, 2006. 2. At all times here relevant, Complainant Zac Scott (“Complainant”) was the owner/occupant of a residence located at 8355 E. Indianola Street, Scottsdale, Arizona (“premises/project”). 3. Respondent Kool Water Contractors Corporation (“Respondent”) is a corporation which holds Arizona Contractors’ License No. 195650, Class B (General Residential) issued by the Registrar of Contractors (“ROC”) on May 3, 2004. Robert Franklin Kroener (“Kroener”) is a corporate officer and the qualifying party for the license. A review of the licensing database maintained by the Registrar of Contractors indicates that this license was suspended July 20 through August 18, 2006 (lack of bond). 4. Complainant filed a complaint with the ROC on June 19, 2006 wherein he alleged Respondent, by and through a Lee Kaplan, verbally contracted to remodel his kitchen including new cabinets, appliances and granite counter tops. Complainant further asserts Respondent was paid in full on the contract and commenced work thereunder by tearing out cabinets and appliances but never returned to complete the project. 5. On September 8, 2006, the Registrar issued a CITATION AND COMPLAINT in Case No. M06-2503 charging Respondent with possible violations of A.R.S. §32-1154A 1 and 7. 6. Respondent filed an answer on September 14, 2006, wherein it denied any contractual relationship with Complainant, that it performed any work for or received any payment from Complainant for work performed on the premises and that Lee Kaplan was ever employed by and/or was a part of Respondent. Respondent further asserted that it had filed a complaint with the Registrar of Contractors regarding a Lee Kaplan and that the Registrar had issued a Cease and Desist order against Kaplan for doing business without a license (Case No. UG07-0007). 7. At the hearing, Complainant testified and submitted Exhibits C and D which were marked, admitted and considered. Exhibits A and B were admitted over objection. Joe Chun (“Chun”) and Melanie Scott (“M. Scott”) also testified on behalf of Complainant. 8. Kroener testified on behalf of Respondent but submitted no exhibits. 9. On the evidence and testimony of record, the following salient facts were adduced at the hearing and are important to note: a. Complainant met a Lee Kaplan (“Kaplan”) while the latter was performing remodeling work at a sushi bar where the former was employed. b. Chun, the owner of the aforementioned sushi bar, testified that Kaplan introduced himself as a partner of Kroener in the instant company and that Kroener did not refute that representation at the time. Chun further testified that during the course of performing work on the bar, Kaplan wore shirts with Respondent’s logo, parked a trailer with Respondent’s name on it in front of the business and provided him with a business card. c. Chun also related that on another occasion, Kaplan and Kroener came to the restaurant together to discuss possible additional remodeling work. d. Kroener never told Chun Kaplan was employed by Respondent. Nor did Chun ever receive a bid from, contract with or pay Kroener any money to perform remodeling work on his restaurant. Kroener never performed any work on Chun’s restaurant. Chun did not know whether Kaplan was listed as a member, officer or director of Respondent, did not investigate this issue or verify that Kaplan was licensed or associated with Respondent. e. M. Scott testified that while performing remodeling work at the premises, Kaplan represented himself as an employee of Respondent. M. Scott has never met, paid any money to or signed a contract with Kroener. f. Complainant testified that he agreed to have Kaplan perform remodeling work at his home in March 2006. At the end of March 2006, Kaplan started remodeling the premises by tearing out kitchen including drywall, appliances and sink. After three or four days’ work Kaplan stopped and did not return. Complainant made several attempts to contact Kaplan and determine when he would return to complete the project. Kaplan made promises to but never performed any additional work. Without Complainant’s knowledge, Kaplan returned to retrieve his tools but left behind a trailer with Respondent’s name on it. g. Complainant filed an abandoned vehicle report on the trailer and investigated the license numbers listed thereon. Complainant testified that the trailer was stolen from an Aztec Construction where Complainant asserts Kroener and Kaplan had been employed before Respondent. Complainant further testified that he investigated the ROC numbers on the trailer and learned that one was for Respondent and the other for Aztec Contractor Services which listed Kroener as well. (Exhibits C and D) However, another “Aztec” company, not Kroener, came to retrieve the stolen trailer. Based on the evidence presented, a factual dispute exists regarding the “Aztec” company name and its involvement with this trailer. h. Complainant never received a card from Kroener or conferred with Kroener regarding work on the premises. Kroener was not present when Complainant and Kaplan entered into a verbal agreement for the latter to do the subject remodeling work and did not represent to Complainant that Kaplan was his partner. Kroener never submitted a bid to Complainant to perform any work on and was never present on the premises. Complainant had no verbal or written contract with Kroener and never paid Respondent any money for any reason. i. Complainant stated the only connection he made between Respondent and Kaplan was Kroener’s failure to refute Kaplan’s assertion that he (Kaplan) was Kroener’s partner while Kroener was present. j. Kroener testified he didn’t recall meeting Complainant before the hearing, never contracted with or offered to perform any work for Complainant at any time nor represented to anyone, including Complainant, that Kaplan was his partner. Kroener acknowledged that at one time he and Kaplan discussed becoming partners but the transaction never occurred. k. Kroener further testified that the trailer in question is not and has never been his or Respondent’s nor did he put any Respondent markings thereon. l. Kroener did not authorize Kaplan to print business cards with his and Respondent’s name on them.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors in Case No. M06-2503 charged Respondent with possible violations of A.R.S. §32- 1154A 1 and 7. Those statutory sections require that the holder of a license or person listed on the license shall not commit the following:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal. …

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.

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. The purpose of licensing Arizona contractors is to regulate the conduct of contracting and protect the public from unscrupulous acts. Beazer Homes Ariz., Inc. v. Goldwater, 196 Ariz. 98, 101, 993 P.2d 1062, 1065 (App. 1999); Better Homes Constr. v. Goldwater, 203 Ariz. 295, 300, 53 P.3d 1139 (App. 2002). The statutory purpose is to prevent unscrupulous or financially irresponsible contractors from deceiving and taking advantage of those who engage them to build. Sobel v. Jones, 96 Ariz. 297, 394 P.2d 415 (1964). 4. Complainant also bears the burden of proof to establish by a preponderance of the evidence that Gladden was Respondent’s agent and had authority to execute the Contract Agreement on its behalf. 5. It has been long held that “…a corporation is not bound by a contract entered in its behalf unless the individual executing the contract had the authority to bind the corporation.” GM Development Corp. v. Community American Mortgage Corp., 795 P.2d 827, 833, 165 Ariz. 1 (Ariz. App. 1990), citing Cameron v. Lanier, 56 Ariz. 400, 402, 108 P.2d 579, 580 (1940). See also, Litchfield v. Green, 33 P.2d 290 (Ariz. 1034), which provided that, “[t]he primary object of an agency is to bring the principal into contractual relations with third parties – into privity with them; and it is elementary, therefore, to say that a principal is not responsible for contracts which he has neither directly nor indirectly authorized.” (Citation omitted). 6. Apparent or ostensible agency may be found “[w]hen a principal has intentionally or inadvertently induced a third person to believe an agency exists…” Brown v. Arizona Dept. of Real Estate, 181 Ariz. 320, 326, 890 P.2d 615, 621 (App. 1995). Apparent authority is not actual authority but, rather, “a power to effect the principal’s affairs arising not from consent, but from the principal’s negligent omission or acquiescence in the agent’s activities. O.S. Stapley Co. v. Logan, 6 Ariz. App. 269, 273, 431 P.2d 916 (1967). “We may not look to the statements of the agent as to the extent of his authority.” Hudlow v. American Estate Life Ins. Co., 22 Ariz. App. 246, 249, 526 P.2d 770 (1974). “[T]he source of the authority, actual or apparent, is the principal.” Services Holding Co. v. Transamerica Occidental Life Ins. Co., 180 Ariz. 198, 203, 883 P.2d 435, 440 (App. 1994). The question of whether a purported agent’s apparent authority is sufficient to bind the principal can be decided only after considering “whether, under all the circumstances of the particular case, the party relying on such authority acted as a reasonable prudent man who knows that he is dealing with an agent, in ascertaining the extent of the authority of that agent. Lois Grunow Memorial Clinic v. Davis, 49 Ariz. 277, 66 P.2d 238 (1937). 7. It is determined and concluded that Complainant failed to demonstrate by a preponderance of competent, probative and credible evidence that Kaplan possessed any authority, be it actual, implied or apparent, to bind Respondent to any contract with Complainant. In fact, Complainant admitted during testimony that he had no contract with Respondent. In addition, no evidence was elicited to establish that Complainant ever had communication with Kroener and/or another duly authorized representative of Respondent from which any authority could reasonably be attributable to Kaplan. The only representations of Kaplan’s authority with Respondent came from Kaplan himself. That Kroener purportedly failed to deny his “partner” status to Complainant when asserted by Kaplan is insufficient to establish a principal/agent relationship between Kaplan and Respondent upon which Complainant could rely. 8. It is also determined and concluded that Complainant failed to establish by a preponderance of competent, probative and credible evidence that any other duly authorized agent and/or representative of Respondent made representations to Complainant and/or his agents or representatives that Respondent authorized Kaplan to enter into any contract with Complainant regarding any aspect of the property including the performance of any construction work thereon. 9. The undersigned determines and concludes that, given the admitted lack of any contract between Complainant and Respondent regarding and the absence of any authority of Kaplan to contract on behalf of Respondent, Complainant failed to establish by the requisite weight of competent, probative and credible evidence that Respondent violated A.R.S. §32-1154A (1). 10. This tribunal also determines and concludes that Complainant failed to establish by a preponderance of competent, probative and credible evidence that Respondent, within the scope of authority of the Registrar of Contractors, violated A.R.S. §32-1154A (7). RECOMMENDED ORDER On the basis of the foregoing, IT IS RECOMMENDED that the entire citation in Case No. M06-2503 be dismissed.[1] Done this day, January 9, 2007.

_________________________ Brian E. Smith Administrative Law Judge

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

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

By ________________________ ----------------------- [1] 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