ALJDEC decisions subject to certification as final

07F-L0262-ROC · Registrar of Contractors · 2007-06-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 26, 2007 APPEARANCES: Sylvia Clark, on behalf of Complainant; John Schroeder, on behalf of Respondent. ADMINISTRATIVE LAW JUDGE: Michael K. Carroll _____________________________________________________________________

On November 27, 2006, a Complaint was filed with the Registrar of Contractors (ROC) alleging that Respondent failed to pay a sales commission owed to Complainant for the sale of a residence constructed by Respondent at 2088 Chip Dr., Lake Havasu City, Arizona. On December 18, 2006, an addendum was filed to the original Complaint alleging that Respondent also failed to pay a sales commission owed to Complainant for the sale of a residence constructed by Respondent at 3505 Kiowa Blvd., Lake Havasu City, Arizona. On February 26, 2007, a Citation was filed by the ROC alleging Respondent had violated A.R.S. §32-1154A (7) and (11).

FINDINGS OF FACT AND CONCLUSIONS OF LAW Findings of Fact: (1) In late June, 2004, Complainant and Respondent entered into an “Exclusive Employment Contract for the Sale, Exchange or Rental of Real Property.” The pertinent provisions of that contract required Respondent to pay Complainant a 6% sales commission for procuring buyers of new homes to be constructed by Respondent. Exhibits C1-A, and C2-A. Pursuant to that contract, Complainant placed real estate agents in a model home built by Respondent for the purpose of selling new homes to prospective buyers on the basis of various floor plans and options selected by the buyers. (2) On May 2, 2005, Complainant and Respondent entered into a “New Construction Commission Agreement,” relating to a home to be constructed at 2088 Chip Drive, Lake Havasu City, Arizona. Exhibit C1-B. That Commission Agreement was based upon a written contract between a buyer, procured by Complainant, and Respondent to build a new home for a base price of $269,000. Exhibits C1-C and C1-D. Under the terms of the signed Commission Agreement, the parties agreed as follows: In consideration for obtaining a customer who is going to have construction work completed by my firm [at 2088 Chip Dr.], I agree herewith to pay Brooks-Clark & Associates Real Estate 6 percent (6%) of the amount [sic] base price.

(3) On May 27, 2005, Complainant and Respondent entered into a “New Construction Commission Agreement,” relating to a home to be constructed by Respondent at 3505 S. Kiowa Blvd., Lake Havasu City, Arizona. Exhibit C2- B. Once again, that Commission Agreement was based upon a written contract between a buyer, procured by Complainant, and Respondent to build a new home for a base price of $189,000. Exhibit C2-C. Under the terms of the signed Commission Agreement, the parties agreed as follows: In consideration for obtaining a customer who is going to have construction work completed by my firm [at 3505 S. Kiowa Blvd.], I agree to pay Brooks-Clark & Associates Real Estate 5 percent (5%) of the contract amount on base price $189,000.

(4) Both of the homes listed in the above Commission Agreements were constructed by Respondent and paid for by the buyers. (5) As to the house constructed on Chip Drive, Respondent acknowledged that the base price of that home was $269,000 and that he had agreed to pay 6% of that amount to Complainant for procuring the buyer. At the hearing, both parties agreed that one-half of the total commission for that property had already been paid by Respondent. Respondent claimed, however, that, due to misrepresentations made by Complainants to the buyers, Respondent was required to pay $550 for a gas meter that was not explicitly noted in the “Specifications List” attached to the contract between Respondent and the buyer. Respondent felt that the $550 paid for the meter should have been deducted from the balance of the commission owed Complainant. (6) As to the house constructed on Kiowa, Respondent acknowledged both the agreement to pay Complainant a 5% sales commission on the base price of $189,000, and the fact that none of that commission had been paid. However, Respondent claimed that, due to subsequent problems between Complainant and the buyer, as demonstrated by Exhibit R6, Complainant was not entitled to the full amount of its commission. (7) At the hearing, both Complainant and Respondent made reference to similar contract disputes involving other homes constructed by Respondent for buyers procured by Complainant. However, those other disputes were not specifically alleged in the Complaint filed with the ROC, and no evidence was received as to any other disputes between the parties. Conclusions of Law: Respondent was cited for failure “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.” A.R.S. §32-1154A (11). Under that statute, a contractor’s failure to pay for services is excused only if the contractor lacks the capacity to pay and has not received payment for the particular construction project for which the services were rendered. Respondent did not dispute that the sale of each of the homes at issue in the Complaint had closed, and that he had received full payment from the buyers. Under the express terms of the written commission agreements with Complainant, Respondent was obligated to pay a specified amount of commission in return for Complainant’s services in procuring a buyer for each of the homes. Although the separate construction contracts between Respondent and the buyers may have later resulted in misinterpretations by Complainant, the buyers, or both regarding the extent of Respondent’s obligation under those contracts, there was no question that, by procuring the buyers, Complainant was entitled to payment for “services rendered in connection with [Respondent’s] operation as a contractor,” under its commission agreements with Respondent. A violation of A.R.S. §32-1154A (11) was proven. As to the alleged violation of A.R.S. §32-1154A (7), such violations are classified as criminal offenses under A.R.S. §32-1164A (1). There was no evidence to suggest that Respondent’s failure to pay Complainant in this case was based upon anything other than a good faith dispute regarding Complainant’s performance and Respondent’s obligation under their commission agreement. There was no violation of A.R.S. §32-1154A (7). RECOMMENDED ORDER Commencing the effective date of the Order in this case,[1] it is recommended that Respondent’s Class KB-02 license be suspended until Respondent pays Complainant the balance of the commission owed on the Chip property, in an amount of $8,070, and the full commission owed on the Kiowa property, in an amount of $9,450. If Respondent satisfies these financial obligations prior to the effective date of the Order, no suspension should take place and this matter should be closed.

Done this day, June 28, 2007.

______________________________________ Michael K. Carroll Administrative Law Judge

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

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

By ___________________________

----------------------- [1] Pursuant to A.R.S. §41-1092.08D, failure by the Registrar of Contractors to accept, reject or modify this Decision within 30 days of receipt by the agency will result in this Decision being certified by the Office of Administrative Hearings as the final administrative decision. In the event of certification of this Decision by the Office of Administrative Hearings, the effective date of the Order in this matter will be 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