ALJDEC decisions subject to certification as final

08F-M0425-ROC · Registrar of Contractors · 2008-07-09

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 1, 2008 APPEARANCES: Ronny Walker appeared as authorized representative for Complainant with Kendra Koa Cline, Qualifying Party. Edward Blackshear, Jr. appeared as authorized representative for Respondent. ADMINISTRATIVE LAW JUDGE: Michael G. Wales _____________________________________________________________________ Evidence and testimony were presented and, based on the entire record in this matter, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT 1. This matter convened for hearing at the time, date and place set forth in the Registrar of Contractors’ Notice of Hearing dated May 29, 2008. 2. HD Commercial Plumbing, LLC (“Complainant”) is a limited liability company which holds Arizona Contractor’s License No. 211407, Class K-37 (Dual Residential and Commercial Plumbing) issued by the Registrar of Contractors (“ROC”) on September 14, 2005. Kendra Koa Cline is a member and the qualifying party for the license. Ronny Walker (“Mr. Walker”) is the Complainant’s field superintendent. A review of the licensing database maintained by the ROC indicates no prior disciplinary action. 3. Blackshear Construction, LLC (“Respondent”) is a limited liability company which holds Arizona Contractor’s License No. 220802, Class KB-02 (Dual Residential and Small Commercial Contracting) issued by the Registrar of Contractors on June 13, 2006. Edward Blackshear, Jr. (“Mr. Blackshear”) is a member of the limited liability company and the qualifying party for the license. A review of the licensing database maintained by the ROC indicates that this license was suspended July 7, 2007 through August 20, 2007 for lack of bond. 4. Complainant filed a complaint with the ROC on September 12, 2007 wherein it alleged that Complainant was a subcontractor for Respondent and Respondent failed to pay the amounts owed to Complainant for the work performed. 5. On February 29, 2008, the Registrar issued a CITATION AND COMPLAINT in Case No. M08-0425 charging Respondent with possible violations of A.R.S. §32-1154A, subsections 7 and 11. 6. On March 11, 2008 Respondent filed an answer alleging that Complainant had accepted a check for $35,000.00 as final payment and no remaining monies were owed. The matter was set for the instant hearing. 7. At the hearing, Mr. Walker testified for Complainant. Complainant submitted Exhibits 1 through 5 which were marked, admitted and considered. Robert Ellingson (“Ellingson”) and Jose Canez (“Canez”) also testified on behalf of Complainant. 8. Edward Blackshear, Jr. testified on behalf of Respondent and submitted Exhibits A and B which were marked, admitted and considered. . 9. From the evidence elicited at the hearing, the following salient facts are important to note: a. On May 1, 2007, Complainant submitted a bid (Exhibit 2) to Respondent to perform plumbing work at a project known as Chandler Entertainment, also known as Portrero’s Sports Bar (the “project”). b. The scope of services in the bid, and bid amount of $64,870.00, were accepted by Respondent and, upon acceptance, the bid became a contract between the parties. c. Work began on May 7, 2007. Complainant received an initial payment of $5,000.00 from Respondent on May 25, 2007. d. On June 22, 2007, Complainant submitted an invoice to Respondent for extra work he was asked to perform by Respondent (Exhibit 3) in the amount of $2,775.00. At hearing, Respondent did not dispute that the extra work was requested by Respondent and performed by Complainant. e. On July 2, 2007, Complainant submitted an invoice to Respondent for additional extra work he was asked to perform by Respondent (Exhibit 4) in the amount of $1,100.00. At hearing, Respondent did not dispute that the extra work was requested by Respondent and performed by Complainant. f. On July 11, 2007, Complainant received a payment of $10,000.00 from Respondent. g. On July 16, 2007, Complainant submitted an invoice to Respondent for additional extra work he was asked to perform by Respondent (Exhibit 5) in the amount of $5,575.00. At hearing, Respondent did not dispute that the extra work was requested by Respondent and performed by Complainant. h. On August 7, 2007, Mr. Walker, Mr. Blackshear, Mr. Parks (a representative of the project owner) and witness Ellingson met to discuss payment issues on the project. After a heated discussion, Mr. Walker, Mr. Blackshear, Mr. Parks and witness Ellingson executed a release (Exhibit 1) wherein Complainant accepted a check for $35,000.00 from Mr. Parks as partial payment. Both Mr. Walker and witness Ellingson testified that all parties understood the $35,000.00 payment was intended to be a partial payment. Mr. Ellingson testified that he drafted the document, which does clearly state that the payment is a partial payment. i. On August 7, 2007, Mr. Parks issued the check for $35,000.00 to Complainant. (Exhibit A). In the memo line in the lower left hand corner of the check the following undecipherable language appears: “Blackshear…$10,000, final….” j. Mr. Walker testified he had not seen the language in the memo line before and questioned its authenticity. Mr. Blackshear argued that the language on the memo line indicates that Complainant accepted this payment as full payment for all work. Neither party testified as to who the author of the language on the memo line was or as to what the language actually states. Mr. Walker testified that no discount was given to Respondent on the amounts due under contract and for the extra work. k. On August 17, 2007, Mr. Walker returned to the project jobsite to complete the trim work pursuant to the contract. Mr. Walker believed he was to receive the remaining balance owed on that date. Respondent was not on site. Mr. Parks told Mr. Walker that he was to install partitions, sinks and tile in the bathrooms. Mr. Walker informed Mr. Parks that such work was outside the scope of his contract with Respondent. Complainant performed no work on that date. l. On August 18, 2007, Mr. Walker returned to the job site to obtain the remaining monies and complete the trim work pursuant to the contract. Respondent was not on site. Mr. Parks did not pay Complainant. Complainant performed no work on that date. m. On August 19, 2007, Mr. Walker left telephone messages for the Respondent and Mr. Parks in an attempt to obtain the remaining monies and to complete the trim work pursuant to the contract. Neither the Respondent nor the Mr. Parks returned his calls. Mr. Walker went to the jobsite and recovered the boxed materials he had purchased for the job and left. Complainant performed no work on that date. n. On August 27, 2007, Mr. Walker, Mr. Blackshear, Mr. Sam Lee (the project owner) and witness Canez met to discuss payment issues on the project. o. Both Mr. Walker and witness Canez, a co-owner and employee of HD Commercial Plumbing, LLC, testified that, at the August 27, 2007 meeting, Mr. Blackshear’s voice was loud and his mannerisms were threatening to a point where both witnesses believed a physical confrontation would be initiated by Mr. Blackshear. Mr. Canez testified that because of the actions and conduct of Mr. Blackshear at that meeting, Mr. Canez was concerned for the safety of his employees should they return to the jobsite. After a heated discussion between Mr. Walker, Mr. Blackshear, Mr. Sam Lee (the project owner) and witness Canez, no resolution was arrived at, resulting in the September 2, 2007 filing of Complainant’s complaint against Respondent. p. At the hearing, Respondent admitted he entered into the contract pursuant to the terms testified to by Complainant’s witness Mr. Walker. Respondent admitted that the balance had not been paid. Respondent admitted that the extra work was performed and Complainant had not been paid for the extra work. Respondent did not present any evidence to dispute that the work was performed by Complainant as requested by Respondent, including the extra work; to dispute that Respondent had been paid by the project Owner; or to dispute that Mr. Blackshear’s threats and actions created a hostile work environment. Respondent simply relied on three arguments. First, Respondent argued that the language on the memo line meant that Complainant had given Respondent a discount and accepted the $35,000.00 as full and final payment, an argument this tribunal finds disingenuous given the clear and unambiguous language stating the payment was a partial payment on Exhibit 1. Secondly, Respondent argued that Complainant admitted that he did not finish the job without justification, another argument this tribunal finds disingenuous given the testimony that Respondent refused to pay Complainant and the undisputed testimony regarding the threatening actions of Respondent towards Complainant. Third, despite the fact that Respondent did not deny requesting the extra work and admitted the extra work was performed, Respondent argued he did not have to pay Complainant because he did not sign any change orders. Nothing in the written agreement, however, requires change orders to be in writing and signed by the parties before payment is to be made on work requested and performed.

APPLICABLE LAW 1. The CITATION AND COMPLAINT issued by the Registrar of Contractors in Case No. H08-0425 charged Respondent with possible violations of A.R.S. §32-1154A, subsections 7 and 11. Those statutory sections require that the holder of a license or person listed on the license shall not commit the following:

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. …

11. Failure by a licensee or agent or official of a licensee 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 when he has the capacity to pay or, if he lacks the capacity to pay, when he has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

2. The Registrar of Contractors has jurisdiction over this matter pursuant to A.R.S. § 32-1101, et. seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 3. To warrant such sanctions by the Registrar, Complainants must demonstrate by a preponderance of the evidence that Respondent violated any one, or more, of the statutory sections cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also, Culpepper v. State of Arizona, 187 Ariz. 43, 930 P.2d 508 (App. 1996). 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 (Rev. 6th ed. 1990). 4. The purpose of licensing Arizona contractors is to regulate the conduct of contracting and protect the public from unscrupulous acts. Beazer Homes Ariz., Inc. v. Goldwater, 196 Ariz. 98, 101, 993 P.2d 1062, 1065 (App. 1999); Better Homes Constr. v. Goldwater, 203 Ariz. 295, 300, 53 P.3d 1139 (App. 2002). The statutory purpose is to prevent unscrupulous or financially irresponsible contractors from deceiving and taking advantage of those who engage them to build. Sobel v. Jones, 96 Ariz. 297, 394 P.2d 415 (1964). 5. In Arizona, the Registrar’s authority to resolve bona fide contractual disputes involving licensed contractors is ancillary to its regulatory mission.[1] The Registrar may determine underlying facts and apply rules of contract interpretation to determine whether a licensed contractor has committed a statutory violation.[2] 6. Respondent’s failure to pay Complainant for the work performed under contract and for the extra work not only constitutes a violation of the charged section of the State’s Contracting laws regarding the need to pay for services rendered in its construction business but said failure to pay is also viewed as a wrongful act, within the meaning of the applicable charged section of the State’s Contracting laws. 7. Notice is also taken of the official Registrar of Contractors public records, which reveal that Respondent’s contracting license was suspended for lack of bond for the period beginning July 7, 2007 through August 20, 2007, the same time frame during which the instant complaint arose.

CONCLUSIONS OF LAW 1. Respondent agreed to be bound by a written contract and but for Respondent’s actions, Complainant would have completed the contract for the stated price. Respondent was contractually bound to pay the contracted amount in full but did not pay Complainant. The remaining unpaid balance on the contract is $14,870.00. 2. Respondent ordered and accepted extra work pursuant to a verbal contract with Complainant. Respondent was contractually bound to pay for the extra work but did not pay Complainant. The amount due for extra work is $9,450.00. 3. Respondent violated the provisions of A.R.S. § 32-1154A (7) and (11).

RECOMMENDED ORDER In view of the foregoing, it is recommended that Respondent’s Class KB-02 license shall be suspended on the effective date of the Order entered in this matter. It is further recommended that if Respondent pays or tenders the sum of $24,320.00 to Complainant on or before the effective date of the Order entered in this matter, then the above-provided license suspension on shall not take place but instead Respondent’s Class KB-02 license shall be placed on active suspension for a period of l4 days followed immediately by a period of disciplinary probation for one year. This alternative penalty shall commence, if at all, on the effective date of the Order entered in this matter. It is further recommended, in addition to the above provided penalties, if any, that any continuation or restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $5,000.00, such bond or deposit to be for the sole benefit of persons injured as defined in A.R.S. § 32-1131 (3) and to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. § 32-1152 (D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twenty-four (24) month period and only if no claims are then pending. [3]

Done this day, July 9, 2008. Office of Administrative Hearings

_____________________ Michael G. Wales Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2008, to:

Registrar of Contractors Fidelis V. Garcia, Director 3838 N. Central Ave., Ste. 400 Phoenix, AZ 85012-1906

By ___________________________ ----------------------- [1] J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 118, 125 (App. 1984). [2] Id. at 407-08, 690 P.2d at 126-27. [3] 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 in this matter will be forty (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