ALJDEC decisions subject to certification as final

07F-G1995-ROC · Registrar of Contractors · 2008-03-18

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 11, 2008.

APPEARANCES: >The Complainants were represented by their attorneys, Xavier Alexander Carpio, Esq. and Justin V. Niedzialek, Esq. >The Respondent appeared through its President and qualifying party, Ralph Herbert Goble, III.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

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

FINDINGS OF FACT

1. Respondent’s principal officer and qualifying party, Ralph Herbert Goble, III (herein called “Mr. Goble”), was shown to be a knowledgeable and experienced electrician who obtained a Class K-11 specialty electrical contractor’s license issued by the Registrar on July 26, 2005 to Respondent’s corporate entity, owned and controlled by Mr. Goble as President. Prior to and for a period of time after such license issuance, Mr. Goble had been an employee of another licensed electrical contracting company.

2. Mr. Goble had been a close friend of both named Complainants, and took part in discussions in early 2005 about a very large new residence and garage structure that Complainants were contemplating having built on their property. Complainants were shown to own and operate a licensed excavating company that would utilize the garage structure, containing a mezzanine, as a business office and as a storage facility. It further appeared that Complainants intended to undertake both the residence and the garage construction as owner-builders.

3. The aforementioned initial discussions between the parties about Complainant’s construction plans included the disclosure by Mr. Goble that he was in the process of obtaining his own contracting license, and Complainants were subsequently made aware of the ultimate issuance of such license.

4. The testimony at the hearing was highly conflicting with respect to the events, conversations and overall dealings between the parties. The most credible version is found to be that the parties concluded a verbal agreement and arrangement pursuant to which Mr. Goble would obtain the services of fellow electrician employees from his then employer to perform work on week-ends and that he would render supervisory management services so as to oversee the jobsite performance of the laborers needed for the electrical installations in the residence and the garage structures. Complainants had agreed to provide or reimburse Mr. Goble for all needed electrical materials as well as to pay for all labor and management costs for the electrical installation work.

5. A special feature of the overall electrical work was the selection of a Lutron system that would enable the dimming and other special functioning of the household and garage lighting. This system, available from industry suppliers and sources, was costly and, if properly installed and operational, would be a highly beneficial upgrade. The actual Lutron system to be installed on Complainants’ project was specifically

designed by Mr. Goble for use on the Complainants’ property. Such system design was shown not to have consisted of any formal detailed drawings but instead was reflected on rough notes, diagrams and floor plan sheets.

6. The actual electrical work did not commence until late September, 2005, several months after Respondent’s license had been issued. Mr. Goble at that time, and on numerous future occasions, would inform Complainants by invoice or E-mail what amounts of money were payable for the electrical workmen and for himself on the project, as well as sums due for any necessary materials he had picked up for use in the contemplated installation work. Over a prolonged time period, the combined total of these periodic payments reached the rather substantial sum of approximately $27,000.00, plus a further amount paid by Complainants in one instance where checks were tendered by Complainants directly to several individual workmen for their labor at Mr. Goble’s specific request. It was not disputed that in addition to management or supervision functions, Mr. Goble found it necessary to individually perform a significant portion of the electrical installation labor on his own, reflecting a different hourly rate charge to be ultimately paid by Complainants.

7. The ongoing contention of Mr. Goble on behalf of Respondent was that the licensed corporate entity was not being utilized on this project, but instead that Mr. Goble was acting in his individual capacity as a manager or supervisor of the jobsite work by workmen that he would provide and cause the performance of electrical installation labor. It must be recognized that any and all claims by persons listed on a valid contractor’s license that they were not functioning under the license but rather as individuals must always be closely scrutinized.

8. No merit is found to any assertion that Mr. Goble was an “employee” of Complainants at any time during the work performances. The basic elements of any valid employee-employer relationship were conspicuously absent. No tax or other

withholdings were made from any transmitted payments that followed the presentation of invoices for the work of several identified workmen, including Mr. Goble. Additionally, the periodic payments were in most all instances transmitted to and through Mr. Goble who would thereafter deliver monies, mostly in cash, to the various performing workmen. A degree of suspicion must necessarily linger with respect to whether any of the workmen, or Mr. Goble himself, ever reported receipt of these substantial monetary sums for tax purposes. Also, on two separate occasions, Mr. Goble executed a written lien waiver for portions of the overall payments received. The facts and circumstances, as revealed by the credible evidence, considered in combination, are determined to be wholly inconsistent with any employment relationship between the Complainants and Mr. Goble.

9. Mr. Goble admittedly did not possess any electrical contracting license in his own name and would, therefore, be performing jobsite construction supervision and hands-on work in a safety trade as an unlicensed person. Notwithstanding the private intention of Mr. Goble to be serving as an admittedly unlicensed individual, separate and distinct from his licensed entity, one of the critical determinations would be the reasonable impression upon and belief by Complainants as to his status under the parties’ verbal agreement and arrangements with respect to this project.

10. Complainants at all times remained aware that their owner- builder exemption would be in jeopardy if they utilized any unlicensed contractors or subcontractors on their construction project. Additionally, of equal or greater importance, the applicable terms and conditions of their construction loan through a lending institution would also forbid any unlicensed activity on the project. They were further aware since their initial talks with Mr. Goble that the electrical contracting license he had reported to have applied for would be imminently issued, and that such license was, if fact, issued prior to the start of any electrical work on their project. It is found

that the course of dealings between these parties generated a reasonable belief and understanding on the part of Complainants that Respondent corporation and Mr. Goble, as its alter ego, were one and the same.

11. It is found and determined that the verbal contractual arrangements with Complainants must be viewed as having been made by and binding upon Respondent’s corporate licensed entity and not by Mr. Goble individually. To hold otherwise would be to conclude that both Mr. Goble and the licensed entity, as well as perhaps the Complainants as owner builders, were operating in violation of the State’s contracting laws with Respondent’s principal operating officer and qualifying party performing unlicensed supervisory and hands-on work and also aiding and abetting the performance of unlicensed work by other individual workmen on this project.

12. Despite numerous and repeated requests and demands to return to the jobsite and to fully complete the electrical installation work, Respondent’s owner was generally unresponsive to Complainants’ communicated desires and needs, having become overly busy with generating new business for his relatively new corporate entity. Two extended deadline dates for full completion of the project imposed by Complainants’ lending institution were not met, shown to have been due in large part to Respondent’s incomplete work. The last jobsite work by Respondent was shown to consist of installing certain fixtures on or about December 18, 2006, and the subsequently sent invoice in the amount of $625.17 was never paid by Complainants. Such invoice was issued under Respondent’s corporate name and address, but impermissibly had omitted Respondent’s contracting license number and classification. However, credible testimony indicated that this omission was promptly rectified when brought to Respondent’s attention.

13. Although the installation was shown to have passed required local inspections and enabled the ultimate issuance of a Certificate of Occupancy, credible

testimony indicated that the contemplated and necessary electrical installation work was left incomplete. Complainants continue to attempt to mitigate their damages and to regain the full use and enjoyment of their property by resorting to other electrical contractors in an effort to achieve proper completion of the electrical installation work.

14. It is found and determined under all the circumstances as adduced at the hearing that Respondent had abandoned, or at the very minimum had “constructively” abandoned its duties arising out of the concluded verbal agreement and arrangements with Complainants. The breach by Respondent of such agreement is further found to have constituted a wrongful (but not fraudulent) act resulting in substantial detriment to the homeowner/Complainants within the meaning of another contracting law provision charged herein to have been violated by Respondent.

15. A showing was made that certain lights on the Lutron system were presently incapable of being fully shut off and that the operation of other lighting in the kitchen was consistently tripping the circuit breaker. Complainants did not, however, sustain their applicable burden of sufficiently demonstrating that knowledge of the specific design by Mr. Goble of the Lutron system installed on this project was unique or was otherwise essential for completion work or for the making of subsequent corrections or adjustments. Stated alternatively, it was not adequately proven that any required completion or correction work was rendered impossible or impractical by specialty contractors knowledgeable with such Lutron system, although it did appear that the ultimate cost of any needed remedial or completion action may tend to be much greater.

16. No valid evidentiary showing was made with respect to the quantum of monetary damages sustained or to be sustained by Complainants as a result of the incomplete work by or attributable to Respondent. In any event, any such provable damages should not properly be adjudicated and awarded by the Registrar but instead

must be more appropriately sought and recovered by Complainants by pursuing available civil remedies before a civil court of competent jurisdiction. In this administrative disciplinary action, the Registrar’s Order should impose a reasonable penalty against Respondent’s license without any conditions of either remedial work or monetary payments.

CONCLUSIONS OF LAW

1. The evidence of record sufficiently established that the agreed labor for the electrical installation work on Complainants’ project was undertaken and substantially, but not completely, performed by Respondent’s corporate entity as a duly licensed electrical specialty contractor.

2. The testimonial and documentary evidence adduced at the hearing established that Respondent has violated the abandonment, wrongful (but not fraudulent) act, and license number disclosure provisions contained in A.R.S.§32-1154(A)(1), (7) and (13); namely, A.R.S. §32-1124(B).

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the Registrar’s Order that Respondent’s Class K-11 License be suspended for a period of 15 days, followed immediately by a disciplinary probation for 90 days.

It is further recommended, in addition to the above provided penalties 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 24 months, including

future renewal periods, in the amount of $2,000.00, such bond or deposit to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. §32-1152. Cash or alternative additional deposits, if utilized, shall be

returned only after the expiration of an additional two year period following the above-provided 24-month period and only if no claims are then pending. Such bond shall be posted on or before the effective date of this Order or prior to the last day of any applicable active license suspension, whichever is later. Failure to timely post such bond shall result in the immediate or continued suspension of Respondent’s license.

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 will be forty (40) days from the date of that certification.

Dated: March 18, 2008. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Fidelis V. Garcia, Director Registrar of Contractors 3838 North Central Avenue (Suite 400) Phoenix, AZ 85012 - 1906 -----------------------

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