ALJDEC decisions subject to certification as final

08F-3254-ROC · Registrar of Contractors · 2009-02-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 20, 2009 APPEARANCES: The Complainant appeared in his own behalf. Ray Mehan, Qualifying Party, appeared for the Respondent. ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ 1. In mid to the latter part of 2007, the Complainant and Respondent entered a number of agreements whereby the Complainant would install security, central vacuum, cable, surround sound and similar systems in five homes being constructed by the Respondent in a project known as Tuscany Villas at Painted Mountain[1] in Mesa, Arizona. 2. The Complainant filed the Complaint on March 24, 2008, for non payment of certain amounts due for work on the contracts. 3. The lots which were at issue at the beginning of the hearing were lot nos. 26, 94, and 115. 4. As to lot 26, the parties are no longer in dispute and agree $300.00 is owed. 5. The Respondent acknowledges it owes a total of $1,700.00[2] for work performed at lot 94. 6. With respect to lot 115, the parties disagree by $37.50 as to the amount owed. The Complainant asserts he is owed $650.00 for installing pre plumbing of a central vacuum system and the Respondent asserts the amount is $621.50 which is 50% of the agreed to total of $1,225.00 for that project. The Respondent argued the agreement provides for 50% payment upon beginning installation and 50% upon completion. The Complainant testified the standard charge for the pre plumbing is $650.00. There is nothing in the agreement between the parties which provides that the cost or value of the pre plumbing for the central vacuum system is limited to 50% of the contract price or otherwise related to the payment schedule. 7. The total amount presently claimed by the Complainant is $2,650.00. This does not include substantial interest charges the Complainant was requesting. Interest is generally not recoverable unless the Complainant posts bond or a security deposit under A.R.S. §32- 1129.02(E). 8. The Respondent testified the sale of the lot 94 home closed and the developer, Tuscany Villas, was paid on this location. The Respondent’s Qualifying Party and corporate officer, Ray Mehan, (Mehan) testified he was also a 25% partner in the developer which did not pay the Respondent upon the closing of the sale on lot 94. 9. As to the homes on lots 26 and 115 the Respondent testified both have gone into foreclosure and the Respondent has not received payment for work done by the Complainant. 10. The Respondent’s principal (Mehan) testified the Respondent has lost most of its assets to foreclosure as a consequence of the real estate and banking crisis. According to Mehan, the Respondent has reduced liabilities of 2.8 million dollars to $610.000.00 on the Tuscany Villas project but has an overall debt load of $20,000,000.00. Mehan testified the Respondent is continuing to liquidate remaining assets, and work with creditors and banks in an attempt to continue business. This evidence shows the Respondent has had some capacity even though diminished, to pay the Complainant over a significant period of time, on this claim[3]. 11. The Respondent asserts it is entitled an $899.85 set off to the Complainant’s claim because this is the amount the Respondent had to pay for tools (equipment) the Respondent had to purchase for the systems installed by the Complainant at the homes for lots 7, 9, and 13. The Complainant testified he left the tools in the garages at the subject homes and spoke with the Respondent’s superintendent, Mike Kuhl, and informed him of the fact. The Complainant testified it is normal practice to leave the tools on site unless requested otherwise. The Respondent’s witness (Mrs. Mehan) testified someone in the office was told by someone representing the Complainant (presumably Mrs. Sachs) that the tools would be delivered when needed rather than left on site[4]. Conclusions of Law The Citation and Complaint alleges violation of A.R.S § 32-1154 (A)(7), a wrongful act with substantial injury; and (A)(11), failure to pay for material or services in excess of $750.00 when the contractor has been paid for the services or material or has the capacity to pay. 1. The Complainant has the burden of proof, and the standard of proof on all issues is by a preponderance of the evidence. Vazzano v. Superior Court, 74 Ariz. 369, 249 P.2d 837 (Ariz. 1952); Culpepper v. State, 187 Ariz. 431, 930 P.2d 508 (App. 1996). A “preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence, §5 (1960). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary, 1182 (6th ed. 1990). 2. The evidence in an administrative hearing must be “substantial, reliable and probative” (A.R.S. §41-1092.07(F)(1)). This means the Complainant has the affirmative responsibility to present sufficient competent evidence to meet the preponderance standard. 3. “Substantial evidence is evidence possessing something of substance and relevant consequence and which furnishes substantial basis of fact from which issues tendered can be reasonably resolved.” Black’s Law Dictionary, Special Deluxe Fifth Edition, (St. Paul Minn.: West Publishing Co., 1979) p. 1281, citing State v. Green, 218 Kan. 438, 544 P. 2d 356, 362. 4. With respect to whether the Respondent had been paid on the project, it is not disputed that the developer (Tuscany Villas) of which the Respondent was a 25% partner was paid for lot 94. The Complainant is owed $1,700.00 for the work performed at that lot. The Respondent’s Qualifying Party as the developer’s 25% partner, did not present evidence or argument of why under the circumstances of the case, the Respondent should not be held responsible for the non payment to the Complainant. However, the Complainant has the burden of proof that the Respondent as an independent entity (a corporation), had been paid for lot 94[5]. The evidence is insufficient to support a violation of (A)(11) on the ground that the Respondent had received payment. 5. For the reason stated in paragraph ten (10) of the Findings of Fact, it is concluded the Respondent has had some significant capacity to pay the Complainant for the services and materials provided on the referenced lots. Based on this, the violation of (A)(11) is proven and incorporates a violation of (A)(7) but not as an independent violation. 6. The Respondent’s evidence is insufficient to establish a set off against the Complainant. Recommended Order It is recommended commencing the effective date of the Order[6] issued in this matter that the Respondent’s Class B license shall be suspended until the Respondent pays or tenders payment to the Complainant in the amount of Two Thousand-Six Hundred-Fifty and 00/100’s ($2,650.00) Dollars.

Done this day, February 3, 2009

______________________________________ Allen Reed Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2009, to:

Armando Contreras , Director Registrar of Contractors 3838 N. Central Ave. Phoenix, AZ 85012

By ___________________________

----------------------- [1] The project anticipated 311 units of which 60 were built. [2] $1,025.00 for security sound, stereo pre-wire, sec pre-wire, music sound, and structural cabling, and $675.00 for surround sound speakers. [3] The payment (the reduction of liabilities) over time to some and not to the Complainant, was not shown to be justified. [4] This type of hearsay is not reliable. [5] If the evidence showed the Respondent’s Q.P./corporate officers, or the Respondent corporation controlled the developer (Tuscany Villas) partnership to the extent that the Q.P. or Respondent could dictate payment decisions, a different conclusion would likely be reached. However, the 25% partnership interest of the Respondent’s Q.P. is insufficient to constitute substantial evidence of control to the extent that the non payment to the Respondent can be charged against the Respondent based solely on the Q.P.’s relationship to each entity. The evidence suggests a potential for an interlocking relationship between the Respondent and the developer to the extent that although the Respondent and developer may be separate entities, the decisions and control of both are in the hands of many (if not all) of the same individuals. The evidence may suggest this but it does not establish this latter condition. [6] Forty (40) days from the date of the Order or date of certification if certified by the Director of the Office of Administrative Hearings.

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

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