ALJDEC decisions subject to certification as final

07F-H0123-ROC · Registrar of Contractors · 2007-07-11

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 10, 2007 APPEARANCES: Complainant: Michael Gerard Cox, partner, and William Guy Cox appeared, pro per. Respondent: Clark Prentis Vaught, member 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. This matter first convened for hearing July 2, 2007 before Administrative Law Judge Carroll pursuant to the Registrar of Contractors’ Notice of Hearing dated March 18, 2007. At that time, representatives from Complainant appeared; Respondent did not. It was determined at that time that Respondent had apparently not been advised of the scheduled hearing date and time and/or was misinformed of the hearing date as set forth in the Minute Entry issued by the Office of Administrative Hearings which indicated July 10, 2007. As a result, the hearing was continued until July 10, 2007. 2. Complainant Mohave Drywall (“Complainant”) is a partnership which holds Arizona Contractor’s License No. 180373, Class K-10 (Dual Drywall). A review of the licensing database maintained by the Registrar of Contractors (“ROC”) indicates that Michael Gerard Cox (“M. Cox”) is a partner and William Guy Cox (“W. Cox”) resigned from the company effective January 6, 2005. 3. Respondent Farwest Development and Construction of the Southwest, LLC (“Respondent”) is a limited liability company which holds Arizona Contractor’s License No. 186851, Class KB-01 (Dual Building) issued by the ROC on July 24, 2003. Clark Prentis Vaught (“Vaught”) is a member and the qualifying party for the license. A review of the above-referenced ROC licensing database indicates that this license was revoked October 4, 2004 and set aside November 1, 2004 (P04-0235). 4. Complainant filed a complaint with the Registrar of Contractors on September 25, 2006, wherein it alleged, inter alia, that, after the “original contract was completed… [Respondent] asked [Complainant] to perform extras and changes…for which [Complainant] never received payment.” 5. Based on Complainant’s complaint, the Registrar of Contractors issued a CITATION AND COMPLAINT in Case No. H07-0123 charging Respondent with possible violations of A.R.S. §32-1154A 7 and 11. 6. M. Cox and W. Cox testified on behalf of Complainant and submitted Exhibit R-3 which was marked, admitted and considered. 7. Vaught appeared on behalf of Respondent, submitted Exhibits R-1, R-2, R-4, R-5 and R-6 which were marked, admitted and considered but did not testify.[1] Larry McManus (“McManus”), Director of Operations, testified on behalf of Respondent. 8. On the testimony and evidence of record, the following salient facts are important to note: a. Complainant, as subcontractor, performed certain drywall work on a project located at 3990 Stockton Hill Road, Kingman, Arizona (“project”) pursuant to a Subcontract Agreement dated December 3, 2004 for a total of $30,000.00. (Exhibit R-1) b. Pursuant to the Subcontract Agreement, Respondent paid Complainant $27,000.00 of the $30,000.00 contract price less $3,000.00 retainage. (Exhibit R-2) c. A factual dispute exists regarding work performed by Complainant on “draft stops” on the project. Complainant asserts that such work was performed pursuant to a written change order (Exhibit R-3) authorized by Respondent’s project superintendent, Edward Collins (“Collins”) which increased the cost of the project to approximately $42,300.00. Respondent contends such “draft stop” work was included in the Subcontract Agreement and plans and specifications (Exhibit R-6). Respondent further contends that Collins had no authority to execute any written change orders on its behalf and that the initials contained in Exhibit R-3 are not Collins’. d. According to its complaint, Respondent owes Complainant $14,323.00 for work done on the project. e. Respondent asserts that it has not been paid the $3,000.00 retainage by the project’s owner and that, in accordance with a “pay when paid” provision in the Subcontract Agreement, it is not obligated to remit such amount to Complainant until received from the owner via joint check payable to both parties hereto.

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 $3,000.00 retainage claimed owed. Though Respondent admits the $3,000.00 retainage is owed Complainant, the Subcontract Agreement 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. 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 the Subcontract Agreement is clear and unambiguous as to its delayed responsibility to pay Complainant where it has not been paid by its general contractor. As a result, Complainant is bound by the Subcontractor Agreement’s express terms and is not entitled to be paid the $3,000.00 retainage until Respondent receives it from the project owner via joint check. 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 $11,323.00 claimed owed pursuant to the referenced “change order.” Based on the evidence adduced at the hearing, a good faith factual dispute exists between the parties regarding whether work performed on the draft stops were included in the original Subcontract Agreement or per the referenced change order. Moreover, Complainant failed to establish by the weight of the evidence that such change order was signed by an authorized agent of Respondent which is required by the parties’ Subcontract Agreement. 5. 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 Respondent admitted $3,000.00 in retainage is due Complainant under the Subcontract Agreement, Respondent has not yet been paid said amount by the project owner and, as above-stated in Conclusion of Law 3, Respondent is not obligated to remit such sum until it is received from the owner by means of a joint check. As a result, Respondent’s failure to pay Complainant the referenced $3,000.00 is not a wrongful or fraudulent act in violation of A.R.S. §32-1154A (7). 6. 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 the Citation and Complaint in Case No. H07-0123 as it pertains to claims for monies due Complainant on the project be dismissed without prejudice to the rights of the named parties to assert and pursue their respective claims and/or defenses in another, more appropriate forum.[2] Done this day, July 11, 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] Per the request of Vaught, the Administrative Law Judge took Administrative notice of the Registrar of Contractors’ file provided the Office of Administrative Hearings. [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