ALJDEC decisions subject to certification as final

07F-G0719-ROC · Registrar of Contractors · 2007-06-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 22, 2007

APPEARANCES: Complainant was represented by its attorney, Jeff Bradford and Respondent was represented by its attorney, Richard Murphy. ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record in this matter, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. Pursuant to contract, Respondent retained Complainant to accomplish specified electrical work on a commercial tenant improvement project. Complainant alleges that Respondent failed to pay for progress payments on the project, thereby causing Complainant to quit work on the contract. Respondent contends that Complainant’s demands for payment were premature, excessive, and in non- compliance with the terms of the contract. These issues are discussed in the findings below.

2. The following salient facts were adduced at the hearing and are important to note:

a. Evidence of record showed that the contract in question was signed by the Complainant on June 19 and Respondent on June 30, 2006. The contract was prepared by Respondent and on page eight (8) the contract provides for payment terms. Under the heading “Payment” the contract provides in the first paragraph that the “subcontractor shall submit to Contractor a written requisition for payment…” minus a 10% deduction for retention purposes. It further states that “the balance of the amount of such requisition, as approved by Contractor, shall be paid to Subcontractor within 30 days.” This paragraph also goes on to provide in bold lettering that “Subcontractor is required to provide Contractor with a list of all suppliers and vendors along with phone numbers for verification of payment.” b. The next paragraph in the “Payment” section of the contract provides, in pertinent part, that “final payment, ten (10%) percent retainage, shall be payable within thirty (30) days after the project punch list is completed and accepted by owner, Contractor and governing authority. However, in no event shall final payment be made to the Subcontractor by the Contractor until the Subcontractor has furnished satisfactory evidence that there are no claims…or liens outstanding…for labor…materials…” c. As part of the contract, there is a document referenced as exhibit A. This document provides in pertinent part that “on the twenty- fifth (25th) day of each month following the date of commencement, Contractor will submit…Application for Payment for the period ending the thirtieth (30th) day of the month, supported by such data substantiating Contractor’s right to payment as Client may require…Contractor will also submit such evidence as Client may request, including…payments made by Contractor to Subcontractors and suppliers as of the date of the request for all previous applications for payment.” d. Evidence of record showed that the original contract price, including accepted change orders was $78,436. However, one of the change orders was taken out of the contract by Respondent, leaving a contract price of $72,017 that was to be paid to Complainant if the project was satisfactorily completed. e. Notwithstanding the conditions set forth in the contract and aforementioned exhibit A, Complainant submitted its first application for payment on or about July 31, 2006. After deducting for retention, the amount of this application for payment was $13,700.00. f. Complainant’s owner and qualifying party, Fred Brimhall (“Brimhall”) appeared at the instant hearing and provided testimony. Brimhall testified that the first application for payment was paid in full by Respondent in a timely manner, without any questions or stipulations, including any requests for the names of subcontractors or suppliers. In addition, there was no complaint made by Respondent that the billing was not dated on the 25th of the month. g. Steve Cappella (“Cappella”), an employee of Respondent, appeared at the hearing and presented testimony. According to Cappella, Respondent never received the written invoice from July 31, 2006. Nevertheless, he agreed that Respondent paid the request for payment, without any conditions. h. On August 22, 2006 Complainant prepared its second invoice for work on the project. This invoice was in the amount of $38,680 and reflected that it was a progress billing for work to be completed through August 31, 2006. Although Respondent did not make any initial complaints in regard to this billing, it only paid Complainant the sum of $6,300.00. i. On or about September 15, 2006 Complainant wrote a letter to Respondent, indicating that the balance for the August 22, 2006 invoice was due on or before September 22, 2006. Complainant sent a follow-up letter to Respondent on or about September 18, 2006 indicating, among other things, that the applicable contract required Respondent to make payments to Complainant within thirty (30) days after submission of a request for payment. j. Respondent’s initial response to the September 15, 2006 letter from Complainant was that it needed lien waivers before any more money would be paid on this invoice. k. On or about September 22, 2006 Complainant submitted a third invoice, in the amount of $12,452.40, for work performed after the August 22, 2006 invoice. This invoice was not paid by Respondent. l. On or about September 25, 2006 Complainant sent another letter to Respondent, indicating that the August 22, 2006 invoice was past due by three (3) days and if not paid within three (3) days, it would stop work on the project. When the payment was not received, as demanded in this letter, Complainant left the project. Shortly thereafter, Complainant sent out a “Stop Notice.” m. Evidence of record showed that on or about September 28, 2006 Respondent sent a facsimile transmission to Complainant, indicating that Complainant was required to supply a list of any and all suppliers and vendors, along with phone numbers, that Complainant used on the project. Without such information, Respondent claimed it had no further obligation to make payments to Complainant. This document also asserted that Complainant’s termination of work on the project was a breach of the contract. n. Several communications and telephone calls went back and forth between the parties during the period of late September and early October 2006 Brimhall testified that the parties finally came to an agreement, wherein Complainant would return to the jobsite on October 4, 2006 and would receive the total balance of the August 22, 2006 invoice at that time (the September 22, 2006 invoice payment was not yet due). According to Brimhall, Complainant returned to the jobsite and after waiting four (4) hours to be paid, Complainant left the jobsite permanently, after not receiving the promised payment balance for the August 22, 2006 invoice. Brimhall testified that he saw the check on the jobsite, but Respondent’s representative refused to turn over the check. o. Complainant claims that Respondent owes it $34,680.00, at this time.[1] Based on Respondent’s failure to pay what Complainant believes is owed, Complainant filed the instant Complaint with the Registrar of Contractors. p. Brimhall admits that Complainant did not complete its work on the project and asserts that only approximately $6,000.00 worth of work was left to be completed. q. Cappella opined that the contract requires all relevant subcontractor and supplier information as a condition precedent to payment on both progress and final payment. He further opined that the requirement to make payments within thirty (30) days began to run from the date Respondent approved the invoice, not the date of the invoice. r. Cappella contends that a lot more than $6,000.00 worth of work was left to be performed when Complainant terminated work on the project. s. Ultimately, Respondent hired another company to complete Complainant’s work and paid them on a time and material basis. Based on what it paid to the subsequent contractor to complete the job and factoring in the payments to Complainant, along with Complainant’s supplier and subcontractor, Respondent contends that it spent more on the project than it was required to pay based on the contract price with Complainant.

3. It is determined and held that the contract in question herein is vague, regarding when the thirty (30) deadlines for payment should begin to run. However, an important term of the contract is that the invoices from Complainant should not be submitted before the 25th of the month and should reflect work that is to be performed through the end of the month. Thus, Complainant’s submittal of the August 22, 2006 was three (3) days premature, as was its demand that payment must be received by September 22, 2006.

4. Notwithstanding the finding that Complainant’s submittal of the August 22, 2006 was premature, it did not threaten to stop work on the project until September 28, 2006, which would have been thirty-three (33) days after the 25th day of August. The applicable contract can reasonably be interpreted to require payment with thirty (30) days of the approved billing date of the 25th of the prior month. Any ambiguity in this contract should be construed against the drafter (Respondent).

5. Evidence of record showed that on September 28, 2006, in response to information from Respondent, Complainant did provide Respondent with the name and phone number of its supplier.

6. Ultimately, after arguing their respective positions back and forth, the parties came to an agreement, which may properly be deemed to be an agreement of accord, wherein Complainant would return to the project and Respondent would pay the balance due on the August 22, 2006 invoice. Complainant returned to the project and was not paid. Respondent’s failure to comply with this agreement is determined to constitute a failure to pay Complainant for monies due, in excess of $750.00 on a construction project, which was not asserted in good faith. In addition, said failure to pay is also found to be a wrongful act, within the meaning of the applicable charged section of the State’s Contracting laws.

7. The instant matter is an administrative, disciplinary proceeding relating to a contractor’s license. The Registrar’s role in this matter is not one of a collection agency or judicial tribunal, but merely one duty- bound to determine whether a violation of this State’s contracting laws has occurred and, if so, impose a proper disciplinary sanction. Neither the filing of a complaint with the Registrar, nor a demonstration that a contractor violated state law, vests in a Complainant the right to receive any particular individualized relief or an order imposing any particular discipline. In the event that Complainant continues to claim monies due and owing from Respondent, such a claim will necessarily have to be brought before a civil court of competent jurisdiction in order to adjudicate and liquidate what amount of the billing remains due to Complainant.

8. As set forth in the Citation and Complaint issued by the Registrar of Contractors, Respondent was advised that in the event of a finding of a violation against Respondent, Respondent’s prior disciplinary record of final Registrar of Contractors’ orders may be considered in mitigation or aggravation. Accordingly, subsequent to conclusion of the instant hearing, notice was taken of official records of the Registrar of Contractors regarding any prior final disciplinary orders against Respondent and said notice revealed that the instant complaint was the only Complaint on the Registrar of Contractors’ current record regarding Respondent. Therefore, Respondent’s prior record is properly deemed to be excellent and thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case.

CONCLUSIONS OF LAW

Respondent violated the provisions of A.R.S. § 32-1154A (7) and (11).

RECOMMENDED ORDER

In view of the foregoing it is recommended, commencing on the effective date of the Order entered in this matter, that the Class B license of Respondent shall be placed on a period of disciplinary probation for 60 days. It is further recommended, in addition to the above provided penalty, that any continuation or restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $1,500.00, such bond or deposit to be in addition to the required surety bond or cash set forth in A.R.S. § 32-1152 (D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twenty-four (24) month period and only if no claims are then pending. 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.

Done this day, June 12, 2007.

______________________________________ Mark A. Silver 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] Complainant deducted a payment made by Respondent directly to Complainant’s supplier.

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