ALJDEC decisions subject to certification as final

07F-L0240-ROC · Registrar of Contractors · 2007-07-31

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 31, 2007 APPEARANCES: Complainant : Philip G. Krueger, Esq., appeared for Ron Carlson. In addition to Ron Carlson, Nikki Gonzales testified. Respondent : No representative appeared on behalf of John W Paulson Custom Builders, Inc. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ A Hearing[1] was convened to determine whether Respondent John W. Paulson Custom Builders, Inc. (hereinafter also, “Respondent” or “Paulson Custom Builders” or “the Contractor” or “the company”) violated state law as has been alleged by Complainant Carlson and as has been cited by the Arizona Registrar of Contractors (also, the “ROC”). Evidence and testimony were presented. Respondent holds a Class B- (General Residential Contracting) license issued by the Registrar of Contractors. Complainant alleges that Respondent accepted money from Complainant for the construction of a custom-built home and has abandoned the project. Based upon an examination of the entire record,[2] the following Findings of Fact are made, Conclusions of Law rendered, and DECISION AND RECOMMENDED ORDER issued: FINDINGS OF FACT 1. Respondent’s license (No. 197770) was initially issued on July 4, 2004. The license was revoked effective May 17, 2007 in Complaint No. L07-0117.[3] 2. John Wallace Paulson is the Qualifying Party identified on the John W. Paulson Custom Builders, Inc. license. 3. The project at issue involved the construction of a custom- built home at a site located in Lake Havasu City, Arizona. The contract was entered into in Arizona; the Contractor is licensed by the State of Arizona; and the property on which the construction was to be undertaken is situated in Arizona. As such, the acts and omissions alleged fall within the requirements of Title 32, Article 3. 4. Complainant Carlson entered into an agreement with John W. Paulson Custom Builders, Inc. on or about April 11, 2006 whereby the Contractor agreed to perform the construction for a $306,000. contract price. 5. Complainant has paid $163,500. on the contract, as is evidenced by wire transfers and a receipt for cash paid.[4] 6. According to Mr. Carlson, Paulson Custom Builders abandoned the project sometime in November 2006 because it reportedly was experiencing financial problems. 7. Carlson made the following payments to Paulson Custom Builders:

• $35,000. deposit • $32,500. 1st Draw • $50,000. 2nd Draw • $46,000. ($36,000. in cash)

Total: $163,500.

8. Paulson Custom Builders informed Carlson on November 16, 2006 that it was shutting down its business. The Contractor made no effort to work with Carlson to lessen the burden on the homeowner resulting from its cessation of business. The Contractor’s only response to Mr. Carlson’s repeated requests for explanation was that Carlson should contact Paulson Custom Builders’ lawyer. 9. Paulson Custom Builders. has not refunded any money to Mr. Carlson. 10. It is probable that Paulson Custom Builders knew by November 1, 2006 that it intended to close its business. However, despite that knowledge, it insisted upon further funding for the Carlson project and accepted a $36,000. cash payment from Carlson. The payment was receipted by Paulson Custom Builders’ secretary, Robin Moore,[5] at its place of business. 11. Carlson has been caused to expend a further $208,205. to various licensed Contractors to have the project completed. Therefore, counting the $163,500. paid to Paulson Custom Builders, Carlson spent $371,705. to complete a $306,000. contract. 12. Mr. Carlson believes that Paulson Custom Builders Paulson Custom Builders provided him with $83,540. worth of labor and materials on this job. 13. Paulson Custom Builders breached its contract with Mr. Carlson by failing its duties of construction. 14. Disconcerted over the contract abandonment and breach, Mr. Carlson filed a Complaint to the ROC on November 16, 2006.[6] 15. Thereafter, upon motion of Mr. Carlson, the ROC issued a CITATION AND COMPLAINT against the Paulson Custom Builders’ license on March 9, 2006, alleging therein violations of A.R.S. § 32-1154(A)(1) and (7). It is those allegations that are herein considered in light of the unrebutted but reliable evidence offered by Complainant Carlson. 16. Paulson Custom Builders filed an A.R.S. § 32-1155(A) ANSWER to the CITATION AND COMPLAINT on March 23, 2007 wherein was acknowledged that Paulson Custom Builders abandoned the project.[7] 17. Although Paulson Custom Builders was provided notice of the Hearing by the ROC's having mailed a NOTICE OF HEARING to the company’s address of record on June 1, 2007, no representative appeared for the Hearing.[8] 18. The unrebutted but reliable evidence establishes that Paulson Custom Builders abandoned its contract with Ron Carlson, without legal excuse, to construct a custom-built home. The evidence submitted further establishes that Paulson Custom Builders owes Mr. Carlson monies paid for work not performed and materials not supplied. 19. Mr. Carlson is entitled to a refund of monies paid by him for which he did not receive his anticipated consideration in labor and materials; he is entitled to a restitutionary award (A.R.S. § 32- 1156.01).[9] 20. Paulson Custom Builders abandonment of the contract was and is wrongful under A.R.S. § 32-1154(A)(7). 21. Some evidence implying fraudulent conduct was entered.[10] The demand for and receipt of further payment on November 1, 2006, the date upon which the Project Manager was terminated by the Contractor, coupled with an admission by Mr. Paulson on November 16, 2006 that the business had ceased operations, leads reasonably to an inference that the appearance of continuing efforts on the project was insincere. However, clear and convincing evidence of fraud[11] is lacking. 22. Paulson Custom Builders’ abandonment constituted a wrongful act. As a result of this act and omission, Mr. Carlson has been substantially injured.[12] 23. The failure of Paulson Custom Builders to appear at the Hearing and provide explanation for its alleged action and inaction constitutes an aggravating factor in the assessment of the nature and degree of the penalty that ought to be imposed.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent with possible violations of A.R.S. § 32-1154(A)(1) and (7). Those statutory sections require that a holder of a license or a person listed on a license 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 Complaint No. L07-0240 under A.R.S. § 32-1101, et seq., a section that authorizes the Registrar to impose disciplinary sanctions against licensees for violations identified at A.R.S. § 32-1154(A). John W. Paulson Custom Builders, Inc. was licensed at the time that the subject agreement for construction and installation work was undertaken. 2. The burden of persuasion generally at an administrative hearing falls to the party asserting a claim, right or entitlement, or an Agency seeking to impose a penalty.[13] Further, the standard of proof is that of the “preponderance of the evidence”.[14] 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.”[15] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case Complainant Carlson, is more probably correct on the issue(s) in dispute. 3. Observing these standards, Mr. Carlson has satisfied his burden, by a preponderance of the evidence, that Respondent Paulson Custom Builders has violated (1) and (7) of A.R.S. § 32-1154(A) as charged in the CITATION AND COMPLAINT. The Contractor has abandoned its contractual obligations by failing to complete the project for which it had contracted and been paid a sum greater than its consideration in return. The abandonment was without legal excuse. The abandonment, in itself, was and is wrongful. 4. An examination of John W. Paulson Custom Builders, Inc.’s Complaint history reveals that twenty-one (21) other Complaints have been filed against its license, with seventeen (17) remaining “Open,” three (3) “Resolved/Settled/Withdrawn” and one (1) “revocation.” License history presents significant basis for no basis for aggravation in an assessment of a proper penalty for the violations herein found.[16] Under A.R.S. § 32- 1154(C), a previously-revoked license may be disciplined. Moreover, the failure of Paulson Custom Builders to appear at the Hearing and give explanation for its alleged action and inaction in the transaction constitutes an aggravating factor in the assessment of the nature and degree of the penalty that ought to be imposed.

RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors revoke Lic. No. 197770. In the event of the certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will fall forty days from the date of that certification.

Done this 31st day of July 2007.

______________________________________ Gary B. Strickland Administrative Law Judge

Original transmitted by mail this 1st day of August 2007 to:

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

By ___________________________

----------------------- [1] The Hearing was conducted via videoconferencing technology with the Complainant located at the offices of the Registrar of Contractors in Lake Havasu City and the Administrative Law Judge situated in Phoenix. [2] The record consists of those documents found within the Agency’s case file, the contents of which the Administrative Law Judge has accorded Administrative notice, the exhibits offered by the Complainant, and the digital record of the proceedings under A.A.C. R2-19-121.

[3] See http://www.azroc.gov/clsc/AZROCLicenseQuery

[4] See Exhibits C-1, C-2, and C-3.

[5] See Exhibit C-3.

[6] See COMPLAINT within the Agency Hearing file.

[7] See ANSWER within the Agency Hearing file.

[8] According to Complainant’s Counsel, both Respondent’s Counsel and Respondent appeared independently at the ROC offices at some point prior to the Hearing only to leve the premises. The start of the Hearing was delayed for twenty (20) minutes to enable an excusably late appearance.

[9] See Murdock-Bryant Constr. v. Pearson, 146 Ariz. 48, 52; 703 P.2d 1197, 1201 (1985) “Restitution began as an ancient remedy to enforce contractual rights which could not be enforced in common law courts due to lack of formality of the contract. D. Dobbs, Remedies § 4.2 at 233 (1973). Various forms of action evolved to permit recovery of goods or money on contracts implied in fact -- that is, those which the law implied from the conduct of the party rather than from any explicit words. Id. at 234.”)

[10] See Echols v. Beauty Built Homes, 132 Ariz. 498, 500; 647 P.2d 629, 631 (Ariz. 1982) (“A showing of fraud requires (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it be acted upon by the recipient in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance on its truth; (8) the right to rely on it; (9) his consequent and proximate injury. (citation omitted). Each element must be supported by sufficient evidence. ‘Fraud may never be established by doubtful, vague, speculative, or inconclusive evidence.’ In re McDonnell's Estate, 65 Ariz. 248, 253, 179 P.2d 238, 241 (1947)”).

[11] See Murdock-Bryant Constr. v. Pearson, 146 Ariz. 57, 60; 703 P.2d 1206, 1209 (App. 1984) (reversed in part on other grounds).

[12] Meaning, a material injury, one that is not illusory. See ”substantial”: WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2280 (2002). [13] See Ariz. Admin. Code R2-19-119(B).

[14] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119(A).

[15] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also J. LIVERMORE, R. BARTELS, & A. HAMEROFF, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.)

[16] See A.A.C. R4-9-117. Prior Record

In any disciplinary proceeding conducted by the Registrar, the licensee's entire license file including the record of prior citations and decisions may be considered by the Registrar in making a decision and order in the case.

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