ALJDEC decisions subject to certification as final

08F-0522-ROC · Registrar of Contractors · 2008-07-01

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 26, 2008.

APPEARANCES: >The Complainant was represented by its attorney, D. Jay Ryan, Esq. >The Respondent appeared through Morgan Allen Adams, its qualifying party and a member of the LLC entity.

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 was and still is an L.L.C entity that, at all times material herein, was the holder of a Class C-39 license as a specialty mechanical contractor. Both parties to this administrative action were shown to have been part of a long-standing business arrangement involving the ongoing sales by Complainant and the purchases by Respondent of various heating and cooling equipment, together with component parts for such equipment and related ductwork. Purchases were made by Respondent

over a prolonged time period during which a substantial volume of supplies and equipment were requested, picked up and subsequently paid for by Respondent on an open account basis.

2. At the inception of these arrangements, Respondent had executed a credit application with respect to ongoing purchases. Complainant furnished various supplies for use by Respondent in its licensed contracting activities. Such credit application and agreement had expressly provided for the payment by Respondent of applicable monthly finance charges at a stated rate in the event that charges to the account were not paid when due.

3. The instant claim by Complainant related to a series of separate purchases of certain heating and cooling units and component supplies, all reflected on invoices prepared by Complainant and transmitted to Respondent. These transactions were shown to have been applicable to materials or equipment provided to Respondent, as requested, for ultimate use on various jobsites over a time period commencing on or about late October, 2006 and ending approximately on late December, 2006. The complaint with the Registrar was filed by Respondent on August 31, 2007, and included monthly finance charges through the date of such filing. The filed complaint had expressly set forth that a monetary sum of $9,782.08 had become long past due and payable.

4. At the hearing, one of Complainant’s exhibits reflected that the amount owing and unpaid by Respondent was $9,939.37. However, it appeared likely that another month of finance charges in the sum of $159.29 had been added subsequent to the date of filing the within complaint, and no subsequent amendment had been requested or granted so as to encompass any post-filing finance charges. The lesser amount set forth in the filed complaint is determined to effectively limit Complainant in this proceeding, although Complainant is free to pursue remedies available in another forum for collection of further accruing additional sums.

5. After having previously purchased and paid for numerous pieces of equipment consisting of heat pumps rated 10 to 12 Seer in sizes or capacities ranging from 3-1/2 tons to 5 tons, and after having installed such units in the homes of over 60 of Respondent’s customers, significant operational and performance problems were experienced and reported to both Complainant and the product’s manufacturer. The experienced problems were further shown to have been potentially attributable to the use of a higher pressure valve or switch as a component element of these units. In any event, the experienced problems necessitated numerous return visits and the incurring of substantial labor charges on the part of Respondent.

6. It did appear that, with Complainant’s involvement, the manufacturer communicated its willingness under applicable warranty programs to furnish Respondent with a quantity of the lower pressure valves or switches at no charge for the purpose of enabling Respondent to substitute this component in all installed equipment of that size and rating. Except for a very few such valves and switches, the final arrangements for delivery and use of the balance of those components have not been effectuated.

7. These same parties are presently involved in civil litigation initiated by Complainant against Respondent based upon the same allegedly past due invoice amounts. Respondent has interposed a substantial counterclaim in that civil lawsuit based upon claimed losses sustained arising after the purchase of the above-described mechanical equipment that had experienced performance problems. The pending civil litigation between these same parties is found not to preclude Complainant from pursuing available administrative remedies in this forum.

8. All of the numerous units with which Respondent had experienced demonstrated performance and operational problems had been the subjects of prior invoices from Complainant that had been fully paid for by Respondent. Stated

alternatively, most all of the individual items forming part of the invoices claimed in this matter to remain unpaid and owing were shown to have been wholly unrelated to any of the purportedly deficient heating and cooling units or their respective component elements.

9. It was not effectively disputed that one of the unpaid invoices (Number 423153), dated December 4, 2006, for a very small monetary amount was for the cost price of a reduced size of a valve or switch that was to have been furnished without cost as part of the warranty action by the product’s manufacturer. In addition to the amount of such invoice, shown to be $17.50, a careful review of the documentary evidence offered by Complainant at the hearing revealed that two other items forming part of the overall total claim in this matter were also labeled as warranty items; namely, an amount of $53.50 on October 30, 2006 (Invoice Number 422404) plus another amount of $181.60 on December 12, 2006 (Invoice Number 003712). The admittedly inappropriate small charge plus the other two warranty item charges, aggregating a total of $252.60, should appropriately be excluded from any payment condition that may be included within the Registrar’s Order hereunder.

10. Although a total sum of $9,939.37 was reflected on a documentary exhibit containing individual invoice totals and on an adding machine tape total, it is found that any payment condition herein must be limited to no greater than the amount of $9,782.08, as set forth in the filed complaint. No amendment to the within complaint was asked for prior to or at the hearing. It is additionally found and determined that, based upon the credible documentary and testimonial evidence presented at the hearing, and after further reducing the filed claim of Complainant by the amounts charged in the invoices for warranty items in the combined sum of $252.60, the adjusted combined total sum of all unpaid invoices in the aggregate amount of $9,529.48 had become and still remains long past due and owing. Such adjusted invoice total may properly be utilized by the Registrar as part of a reasonable condition in any disciplinary Order to be entered in this administrative action.

11. The course of conduct on the part of Respondent in withholding payment based upon its position that the claimed losses resulting from previously purchased equipment and components should generate the elimination or significant reduction of any claims for subsequent purchases was not shown to have been indicative of any bad faith or arbitrary behavior on the part of Respondent. Under all the circumstances, it must be held that the proof presented at the hearing failed to establish the committing of any wrongful or fraudulent act by Respondent resulting in detriment to Complainant within the meaning of one of the contracting law provisions charged herein to have been violated by Respondent. Consequently, it is further found that the Registrar should decline to impose any additional penalty against Respondent other than a provisional license suspension conditioned upon the full payment of the adjusted amount found to be payable on the invoices that were the subjects of the instant complaint and hearing.

CONCLUSIONS OF LAW

1. The underlying claim of non-payment asserted herein by Complainant against Respondent was based in most part on equipment and supplies furnished that were separate, different and apart from any previously concluded sale and purchase arrangements. In point of fact, except for only a very few items and very small dollar amounts, the within claim by Complainant was derived from various invoices relating to units or components that were not the subjects of any complaints or problems with respect to their functioning and performance. No defense or set-off by Respondent to the payment of the separate invoices relating to unpaid amounts claimed past due and owing in the instant proceeding may properly be recognized so as to reduce or eliminate the claimed indebtedness. In this case, the inclusion in the Registrar’s Order of a payment condition in the amount of 9,529.48 is determined to be fully appropriate.

2. Nothing in this decision is intended to address the merits of Respondent’s civil counterclaim or to otherwise impact upon the respective rights, entitlements, defenses or offsets potentially available with respect to the parties’ positions on the previously purchased identified equipment or components that resulted in experienced problems and ultimate warranty issues.

3. The evidence of record, as presented at the hearing, adequately established that Respondent has violated the statutory non-payment provisions contained in A.R.S.§ 32-1154(A) (11). However, no violations by Respondent of the provisions of A.R.S.§ 32-1154(A)(7) or (18) were sufficiently proven hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of the Registrar’s Order that Respondent’s Class C-39R license be suspended unless or until written proof is filed with the Registrar that Respondent has paid or tendered the sum of $9,529.48 to Complainant.

It is further recommended that if written proof is filed with the Registrar on or before this Order’s effective date confirming that Respondent has paid or tendered the above-described monetary amount to Complainant, then no license suspension shall be imposed and the entire Citation and Compliant in Case Number08-0522 shall be closed.

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: July 2, 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