ALJDEC decisions subject to certification as final

08F-2305-ROC · Registrar of Contractors · 2009-02-24

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 19, 2009.

APPEARANCES: >Complainant appeared through Bryan J. Berry and Roxanne L. Berry, both being authorized members of the LLC entity. >The Respondent appeared through its President and qualifying party, Geoff Scott Brisbin.

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. Pursuant to a written subcontract agreement, Complainant agreed to and did perform extensive framing work on several condominium projects on which Respondent was serving as the projects’ general contractor.

2. Most all dealings and arrangements were concluded by and between several of Complainant’s key individuals and Geoff Brisbin, who was shown to be Respondent’s sole stockholder, the corporate President and the licensee’s qualifying Party. Mr. Brisbin was also admittedly the principal manager and member of several LLC entities that were owned and controlled by him or a family trust.

3. Mr. Brisbin’s construction-related operations would customarily encompass the formation of a separate LLC entity to handle most all financial aspects of different condominium complexes that were to be and actually were built in various locations throughout the metropolitan Phoenix area. Additionally, the same Mr. Brisbin was the principal officer and owner of another corporate entity, Cambria Homes, Inc. (herein called “Cambria”) that was functioning as a construction manager and a sales agent for the various projects.

4, The underlying complaint in this administrative action related to monetary amounts claimed to be long past due and payable for framing services and materials provided to a project known and Maryland Manor. More specifically, the claim consisted of charges for verbally requested and authorized extra Change Order work, over and above the scope of work under the original subcontract, in the combined aggregate sum of $95,550.00, no portion of which had been paid or tendered by Respondent despite numerous requests and demands. The aforesaid total amount was the subject of two separate invoices sent respectively in February, 2007 and in May, 2007, and becoming due and owing 30 days after each such invoice.

5. It was uncontroverted that the work set forth in the various Change Orders comprising the two invoices was appropriately accomplished by Complainant, that the total values were reasonable in amount and that all such extra work was authorized in advance by or on behalf of Mr. Brisbin through the on-site superintendent, John Harmon, who ostensibly was working for Cambria.

6. The LLC entity formed and subsequently involved in the Maryland Manor project was 47 Maryland Development Partners, LLC (herein called “Maryland Partners”). Cambria’s corporate entity was also shown to have been actively involved through both the jobsite Superintendent and Mr. Brisbin, its principal owner and operating individual. Neither Maryland Partners nor Cambria possessed any contracting license. It was not disputed that Respondent, G. Brisbin Contracting, Inc., under its issued Class B license, was acting as the general contractor for this project and was listed as such on the building permit as well as on other construction- related documents.

7. Credible evidence tended to indicate that Complainant did receive payment of the full amount due under the original subcontract agreement, with most all of the payment checks being transmitted somewhat belatedly by Maryland Partners. Another separate dealing between these same parties following very similar subcontract and payment arrangements with the same involved individuals, known as the Los Somantos project that was in a different location, had been the subject of a separate claim and ultimate payment, albeit very tardy, by 7 Baseline LLC, another of Mr. Brisbin’s controlled entities. The within claim related solely to the invoiced charges for extra work by Complainant on the Maryland Manor project pursuant to authorized Change Orders.

8. Any and all stated positions by any person named on and operating under a contractor’s license issued by the Registrar to the effect that his or her activities in a given dealing or situation were not undertaken or performed under the license must necessarily be carefully and strictly scrutinized.

9. In this case, the evidence was clear that Complainant’s personnel were, at all times, dealing with Mr. Brisbin during the entry into subcontractual arrangements and the performance of the agreed work. It must be held and determined under all the

surrounding circumstances that Mr. Brisbin failed to sufficiently distance himself from his licensed entity that admittedly was functioning as the project’s general contractor and was listed as such on the issued municipal building permit. Moreover, all of Mr. Brisbin’s purportedly separate entities shared the same offices, administrative personnel and telephone numbers. It is further found and determined that Complainant could and did credibly believe that Respondent, through Geoff Brisbin, was one and the same entity as Cambria as well as the various LLCs formed to administer the separate condominium projects, all of which were operated and controlled by Mr. Brisbin.

10. Any contracting activities by either Cambria, as the managing, consulting and sales organization, as well as by any of the LLC entities formed for each of the different condominium projects, would be statutorily impermissible. Such activities require a valid and current contractor’s license, and Respondent was the sole entity possessing the required license. The Complainant consistently conducted all of its subcontractual dealings with Mr. Brisbin, personally, or with an individual to whom they were directed by Mr. Brisbin. Consequently, Complainant reasonably believed that Respondent, as Mr. Brisbin’s licensed entity, was the ultimately responsible party for authorizing and paying for the extra work charges that are the subjects of the instant complaint filed with the Registrar of Contractors.

11. After the extra work was performed and the charges were invoiced, Mr. Brisbin and one of Complainant’s principals concluded a subsequent verbal agreement to extend the otherwise applicable due date for payments to Complainant of amounts set forth in the submitted invoices.[1] Such agreement recognized certain financial difficulties being experienced by Mr. Brisbin and/or his various entities and evidenced a

willingness to await the completion and contemplated sales of the condominium units that were the subjects of Complainant’s earlier framing work.

12. Of the originally planned 50 units for this project, only 18 were fully completed, with the balance of 32 units remaining only partially completed in the range of 65% to 80%. It is further found from the credible testimonial and documentary evidence that most all of Complainant’s extra Change Order work that had been appropriately performed for the benefit of Respondent and that became the subject of the presented invoices had been concentrated on those buildings in which the 18 completed units were located.

13. It was additionally revealed that, due to the significant downturn in the local real estate market, only 2 of the completed units were ultimately sold, but also that 2 other units were rented. It is determined that the extended payment date under the parties’ subsequent agreement would be triggered by any form of occupancy, whether by sale or rental. Consequently, even if the time extension agreement were treated as valid, no less than 22.2% (4 units out of the 18 completed units) of the combined invoice totals would have become past due, owing and payable.

14. There was little doubt that the framing work by Complainant served to benefit the various units forming part of the Maryland Manor project. At the very minimum, Respondent must be held to have shared joint and separate responsibility with the other LLC and corporate entities in which Mr. Brisbin was actively involved with respect to all of the payments remaining past due and owing to Complainant for the subcontractual work that was admittedly performed properly.

15. Hopping between entities, only one of which was the holder of a valid contracting license, should not and does not immunize Respondent from full or at least shared liability for payment. Nor does the subsequent filing for Chapter 7 Bankruptcy

protection by Mr. Brisbin and his spouse, individually, serve to stay or otherwise impact upon administrative disciplinary proceedings against the license held by Respondent’s corporate entity. This Finding of Fact is also intended to serve as and constitute a Conclusion of Law as part of the within Decision and Recommended Order by the assigned Administrative Law Judge.

16. By expressly having authorized the extra work that Complainant duly performed and by failing or refusing to pay any portion of the invoices presented for such work, Respondent is also found to have committed a wrongful (but not fraudulent) act resulting in financial detriment to Complainant within the meaning of another contracting law provision charged hereunder as having been violated by Respondent.

17. Although it is not a proper function of either the Office of Administrative Hearings or the Registrar of Contractors to adjudicate and award money damages which must be recovered, if at all, through pursuit of a civil court action, the Registrar is empowered by statute to impose reasonable conditions which may serve to reduce or eliminate any otherwise appropriate disciplinary penalties for proven violations of the State’s contracting laws. Whenever the performance of further corrective or remedial measures on a jobsite by the original contractor is no longer warranted or desired, the inclusion of a condition in the nature of restitution, total or partial, is fully appropriate and equitably justified. Such authorization to provide for restitution from a contractor to a prevailing party in an administrative action has been legally upheld in Sunpower of Arizona v. Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430 (1990), and subsequently was expressly confirmed by the statutory enactment of A.R.S. §32-1156.01. In this way, a Complainant in an administrative action who has sustained the burden of proving contracting law violations does not have to await the outcome of protracted civil litigation in order to recover at least a portion of a demonstrated loss and, of equal or perhaps greater significance, a licensed contractor/Respondent is given the means to control, to some extent, the severity of any otherwise appropriate disciplinary penalty.

18. In this case partial restitution based upon approximately 22.2% of the unpaid invoices totaling in combination the monetary amount of $95,550.00, or the sum of no less than $21,200.00, is found and determined to constitute a fair and reasonable condition for inclusion in the Registrar’s disciplinary Order to be entered in this administrative disciplinary matter. Nothing in this decision is intended to limit or preclude the pursuit of other collection remedies for Complainant that may be available in another appropriate forum with respect to recovery of the remaining monetary balance claimed and proven herein to remain long past due, owing and payable to Complainant from Respondent and/or its other affiliated entities.

19. Notice is taken of the Registrar’s license files which reveal that Respondent’s Class B license, held by a corporate entity, was suspended in another disciplinary proceeding under Case Number G08-0702 on January 23, 2009 not long before the hearing date and while this action was pending. Such license suspension action does not prevent the Complainant from pursuing its administrative remedies nor does it preclude the Registrar from conducting these administrative disciplinary proceedings which are expressly authorized by statute.[2] Since little or no motivation would exist for any entity to undertake and accomplish remedial actions, whether of a construction or restitutionary nature, to avoid the imposition of a suspension of an already-suspended license, the Registrar must properly and necessarily consider a provisional revocation when formulating reasonable conditions for possible inclusion in the Order to be entered in this case.

CONCLUSIONS OF LAW

1. Geoff Scott Brisbin was and is clearly a “person,” as defined in A.R.S.§32-1101A(5) on the Respondent’s Class B license. There was no indication that this

individual had started or continued to operate under his presently licensed entity in order to avoid any specifically identified liability for this same individual’s acts or omissions when purportedly acting on behalf of his other unlicensed LLC and corporate entities involved in the condominium construction, through other specialty subcontractors, and also in the sales of the constructed condominium units. However, certain obligations will, nevertheless, follow such an individual into the general contractor’s license held by Respondent which then remains vulnerable to discipline unless or until all proper obligations are satisfied.

2. The understandable confusion to the public resulting from the use of several different entities owned and controlled by Respondent’s sole stockholder, officer and qualifying party, considered together with a recognition of the significant injustice promoted by any observance of separate business formations in an attempt to limit or avoid payment responsibilities, must be held to generate a valid basis for concluding that Respondent remains liable for the failure to pay a substantial portion of the sums claimed due and owing hereunder by Complainant.

2. The evidence of record adequately established that Respondent has violated the provisions of A.R.S.§32-1154(A)(7) and (11).

RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent’s Class B license be revoked on the effective date of the Registrar’s Order.

It is further recommended that if written proof is filed with the Registrar on or before this Order’s effective date that Respondent has paid or tendered to Complainant the sum of $21,200.00, by way of partial restitution, the above-provided revocation

penalty shall not be imposed by the Registrar and the entire Citation and Complaint in Case Number 08-2305 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: February 25, 2009. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

William A Mundell, Director Registrar of Contractors Legal Department 3838 North Central Avenue (Suite 400) Phoenix, AZ 85012 - 1906

----------------------- [1] Any such time extension agreement without a corresponding increase in the costs to be paid would be of perhaps questionable or doubtful validity in light of the fact that timely payment in full had been part of Respondent’s pre-existing duty to pay when due, thereby resulting in a probable lack of requisite consideration to support the purportedly concluded extension agreement. [2] See A.R.S.§32-1154(C).

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