ALJDEC decisions subject to certification as final

07F-L0269-ROC · Registrar of Contractors · 2007-10-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 18, 2007 at 1:15 p.m. APPEARANCES: Complainant All American Air Conditioning of Havasu LLC appeared through Gary Hagen, General Manager, and Patti Diaz, Office Manager; Respondent John W. Paulson Custom Builders, Inc. did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The sole issue in this matter is whether Respondent general contractor violated any licensing statute by failing to pay Complainant subcontractor for services rendered and materials supplied pursuant to the parties’ subcontract. Based on Complainant’s evidence and Respondent’s failure to appear at the duly noticed hearing, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Arizona Registrar of Contractors. FINDINGS OF FACT On April 21, 2002, the Registrar issued License No. ROC174485, Class K-39 for air conditioning and refrigeration to Complainant All American Air Conditioning of Havasu L.L.C. (“All American”), a limited liability company. On July 4, 2004, the Registrar issued License No. ROC197770, Class B- for residential general contracting to Respondent John W. Paulson Custom Builders, Inc., a corporation. John Wallace Paulson was Respondent’s qualifying party. Respondent’s address of record at the Registrar is P.O. Box 389, Lake Havasu City, AZ 86405-0389. On November 27, 2006, the Registrar received a complaint from All American against Respondent’s license, which alleged that Respondent owed $2,208.25 under a subcontract. The Registrar referred the complaint to Respondent for its immediate attention. All American subsequently requested an administrative hearing. On May 16, 2007, the Registrar issued a Citation and Complaint against Respondent’s license, charging violations of A.R.S. § 32-1154(A)(7), (11), and (13) (namely A.R.S. § 36-1124(B)). The Registrar mailed the Citation and Complaint to Respondent at its address of record and at 3711 Kicking Horse Dr., Lake Havasu City, AZ 86404. On May 24, 2007, the Registrar received Mr. Paulson’s written answer on behalf of Respondent, which did not deny that Respondent owed money to All American but alleged that Respondent had closed its business on November 14, 2006 “due to the detrimental actions by others who ran the day-to-day operations,” that his health was not good, and he had been “financially devastated by all of this.” The Registrar referred the matter to the Office of Administrative Hearings and, on September 17, 2007, issued a Notice of Hearing setting a hearing on October 18, 2007 at 1:15 p.m. at the Registrar’s Lake Havasu City office. The notice was mailed to Respondent at the same two addresses as the Citation and Complaint. A hearing was held on October 18, 2007. All American’s representatives appeared for the duly noticed hearing. Although the beginning of the hearing was delayed fifteen minutes to allow Respondent additional travel time, it did not contact the Registrar or the Office of Administrative Hearings to request that the start of hearing be further delayed or that the hearing be continued and did not appear through an authorized employee or attorney. Respondent did not present any evidence to defend its license. All American established that, on December 19, 2005, it submitted a proposal for various options for work to be performed on a residence that Respondent was constructing at 1908 Burgundy Drive in Lake Havasu City. The options included $4,533.00 to install the air conditioning system in the residence and $4,300.00 to install a garage air conditioning system, for a total of $8,833.00. All American’s proposal provided that payment would be “50% due upon completion of rough-in and balance due upon completion of work.” Mr. Paulson on Respondent’s behalf circled the two options described above and signed All American’s proposal, just above the terms of payment. All American subsequently completed the rough-in on the project. On January 23, 2006, All American submitted Invoice No. 4842R to Respondent for $4,416.50 for rough-in of the work at 1908 Burgundy Dr. On March 8, 2006, Respondent issued check number 3942, drawn on its business account, made payable to All American, in the amount of $4,686.50. The references for the payment indicate that $4,416.50 was for Invoice No. 4842R and $270.00 was for Invoice 4855, which is not relevant to this action. Respondent’s license number did not appear on check number 3942. All American then completed the work contemplated by its proposal at 1908 Burgundy Dr. On May 5, 2007, All American submitted Invoice No. 4842C for $4,416.50 for the remainder of the work. On August 4, 2006, Respondent issued check number 3557, drawn on its business account, made payable to All American, in the amount of $2,208.25. The reference for the payment indicates a balance due of $4,416.50 for Invoice No. 4842C. No discount or other explanation appears for Respondent’s payment of half the balance due. Respondent’s license number did not appear on check number 3557. All American’s witnesses testified that Respondent did not discuss the outstanding balance, except to send a letter addressed to “Vendor, Supplier and/or Creditor” dated December 14, 2006, in relevant part as follows: John W. Paulson Custom Builders, Inc. was advised on November 14, 2006 by our attorney to close the doors of our company. This was due to the mismanagement of others working for our company. Due to this mismanagement we are in debt to not only vendors, but also the IRS and the State of Az. This advice from our attorney was to stop any further financial burden from occurring.

The debt to the IRS and the State of Arizona has to take precedence over all at this point in time. We have been unsuccessful in liquidating assets, (which are not many), at this particular time of the year.

We will need to satisfy the tax issue first and foremost. When we are able to do that, if there is anything left over, we may possibly be able to pay a percentage across the board to the vendors. We can not guarantee that at this time. Right now there is no money to pay anyone.

We would like to take this opportunity to apologize for this inconvenience and to let you know that we did not do this intentionally.

Respondent’s license number did not appear on the letterhead on which the December 14, 2006 letter was written. All American’s office manager Ms. Diaz testified that it has not received any further payment from Respondent. The Registrar’s records show that, before the date of the hearing in this matter, Respondent had canceled its license on November 30, 2006 and that, subsequently, the Registrar revoked its license four times (first revocation on May 17, 2007 in Case No. L07-0117, second revocation on August 3, 2007 in Case No. L07-0085, third revocation on September 25, 2007 in Case No. L07-0239, and fourth revocation on October 10, 2007 in Case No. L07-0117). Respondent’s license history is considered a factor in aggravation of the penalty recommended in this matter. CONCLUSIONS OF LAW The notice of the hearing that the Registrar mailed to Respondent at its address of record and another address it provided was reasonable and it is deemed to have received it.[1] Complainant bears the burden of proof and must establish statutory violations by a preponderance of the evidence.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[4] All American has borne its burden to establish that Respondent violated A.R.S. § 32-1154(A)(7)[5] and (11)[6] by failing to pay All American $2,208.25, the amount remaining due under Invoice No. 4842C. All American also has established that Respondent violated A.R.S. § 32- 1154(A)(13) (namely A.R.S. § 32-1124(B))[7] by failing to show its license number, preceded by the acronym “ROC,” on its checks and stationery. RECOMMENDED ORDER Based on the contracting law violations that were proven in this matter, it is recommended that, on the effective date of the final order in this matter, the Registrar of Contractors revoke License No. ROC197770, Class B- previously issued to John W. Paulson Custom Builders, Inc. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty days from the date of certification. Done this day, October 18, 2007.

______________________________________ Diane Mihalsky Administrative Law Judge

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

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

By ___________________________

----------------------- [1] See A.R.S. § 41-1061(A).

[2] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

[4] Black’s Law Dictionary at page 1220 (8th ed. 1999).

[5] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

[6] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure by a licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay . . . .”

[7] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure in any material respect to comply with this chapter.” The specific statute violated is A.R.S. § 32-1124(B), which requires licensed contractors to include their license number “on all written bids submitted by the license and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.”

-----------------------

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