ALJDEC decisions subject to certification as final

09F-2534W-ROC · Registrar of Contractors · 2009-09-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 3, 2009 at 1:30 p.m. APPEARANCES: Complainant Klein Enterprises Inc. dba Carpet Rite appeared through Steven Winfield Klein, its Qualifying Party and President; Respondents Quadro Inc. and Bellamonte Homes Inc. did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT On May 13, 1986, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC065107, Class C-08R for residential carpet to Complainant Klein Enterprises Inc. dba Carpet Rite, a corporation. On December 12, 1997, the Registrar issued License No. ROC130033, Class B- for residential general contracting to Respondent Bellamonte Homes Inc., a corporation. On September 10, 2001, the Registrar issued License No. ROC168614, Class C- for residential painting and wall covering to Respondent Quadro Inc., a corporation. Respondents Bellamonte Homes Inc. and Quadro Inc. share the same qualifying party, Adolph Gustavo Banuet, and the same address of record, P.O. Box 12012, Scottsdale, Arizona 85267. On October 29, 2008, the Registrar received a complaint from Complainant against Respondents’ licenses, which alleged that Respondents owed $2,635.45 for carpet and carpet installation that Complainants had provided pursuant to a subcontract. The Registrar referred the complaint to Respondent for its immediate attention. On December 1, 2008, the Registrar informed the parties that the complaint had been closed because the Registrar had not received a reply from Complainant to its most recent correspondence. On December 8, 2008, the Registrar received Complainant’s request that the complaint be reopened and that a citation be issued against Respondent Quadro. On April 15, 2009, the Registrar issued a Citation and Complaint against Respondents’ licenses, charging A.R.S. § 32-1154(A)(7) and (11). The Registrar sent copies of the Citation and Complaint by certified mail to Respondents’ address of record. On April 24, 2009, the Registrar received Respondents’ written answer to the Citation and Complaint, which admitted that Respondents owed the money but affirmatively alleged that Respondents’ qualifying party was “still in the process of selling the home in which we used Carpet Rite’s service.” Respondents’ qualifying party also stated that it was expecting draws from its painting business that would allow it to pay Complainant. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, to schedule and to conduct a fair hearing.

On June 8, 2009, the Registrar issued a Notice of Hearing, which notified the parties that a hearing had been set on September 3, 2009 at 1:30 p.m. at the Office of Administrative Hearings. The Registrar sent via certified mail copies of the Notice of Hearing to Respondents at their address of record. A hearing was held on September 3, 2009 at 1:30 p.m. Complainant’s representative appeared, testified, and submitted three exhibits. Although the beginning of the duly noticed hearing was delayed fifteen minutes to allow Respondents additional travel time, they did not appear through a duly authorized employee or attorney, did not contact the Office of Administrative Hearings to request a continuance or that the time for the hearing be further delayed, and did not present any evidence to defend their licenses. Complainant submitted three exhibits: (1) Complainant’s estimate dated July 23, 2008 to provide and lay carpet in the master bedroom and closet of the “Banuet residence” at a cost of $2,635.45, which Respondents’ qualifying party Mr. Banuet had signed to approve; (2) An invoice to Respondent Bellamonte Homes Inc. dated August 4, 2008 for the carpet and installation at Mr. Banuet’s house on 78th St.; and (3) A copy of a judgment in Maricopa County McDowell Mountain Justice Court Case No. CC2008253637 dated March 2, 2009 in the amount of $2,636.45, plus $130.00 in court costs, in Complainant’s qualifying party Steve Klein’s favor against Respondents’ qualifying party Mr. Banuet. Mr. Klein testified that the judgment was for the carpet installation that Complainant had performed at Mr. Banuet’s home, which is the same claim that Complainant has made against Respondents’ licenses. The Registrar’s record shows that, on June 24, 2008, Respondent Bellamonte Homes Inc.’s license was suspended for lack of bond, that on January 1, 2009, the license was suspended for nonrenewal, and that the license has not been reinstated. This complaint is apparently the only complaint currently pending against Respondent Bellamonte Homes, Inc.’s license. The Registrar’s record also shows that Respondent Quadro Inc.’s license is current and in good standing. This complaint is apparently the only complaint currently pending against Respondent Quadro Inc.’s license. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[1] 1. The notice of the hearing that the Registrar sent to Respondents at their address of record was reasonable and Respondents are deemed to have received notice of the hearing.[2] 2. Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[4] 2. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[5] 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.”[6] 3. A.R.S. § 32-1154(A)(11) specifically 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 . . . .” 4. A contractor’s inability to pay a subcontractor and nonpayment by the owner on a project are affirmative defenses that the contractor bears the burden to prove in a subcontractor’s administrative complaint under A.R.S. § 32-1154(A)(11). 5. Respondents’ qualifying party has never disputed that he owed money to Complainant for carpet installed in the residence in which he is currently living. Respondents presented no evidence at the duly noticed hearing and did not carry their burden to establish the affirmative defenses of inability to pay or lack of receipt of the payment for the project for which Complainant furnished materials and services. 6. “‘Under the doctrine of res judicata, a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action.’”[7] Only the Registrar may penalize a contractor’s license, however, and “[t]he mere commission of a prohibited act is insufficient in and of itself to invalidate [a] license.”[8] 7. The issue of whether Respondents owe money to Complainant and the amount of the debt was the same in Maricopa County McDowell Mountain Justice Court Case No. CC2008253637 and in this administrative complaint against Respondents’ licenses. The doctrine of collateral estoppel[9] therefore establishes that Respondents’ qualifying party failed to pay Complainant’s qualifying party $2,636.45 for materials provided and services rendered to Respondents’ qualifying party’s contracting business. 8. Complainant therefore has borne its burden to establish that Respondents violated A.R.S. § 32- 1154(A)(7)[10] and (11) by failing to pay Complainant $2,636.45. 9. The suspended status of Respondent Bellamonte Homes Inc.’s license does not preclude Complainant from pursuing its administrative remedy nor preclude the Registrar from conducting these disciplinary proceedings.[11] If Respondent fails to comply with any condition that the Registrar sees fit to include in his final Decision and Order in this matter, its suspended license will be revoked. 10. If the Registrar accepts this recommendation and, as a result of Respondents’ failure to comply with the Registrar’s final decision in this matter, the Registrar revokes Respondents’ licenses, the revocations in due course will lead to revocation of any other license on which Respondents or their qualifying party may be listed[12] and may prevent any new license from being issued to Respondents or their qualifying party.[13] 11. This same law that makes the natural persons listed on a contractor’s license personally responsible under the contracting statutes, in contrast to civil statutes regarding corporate liability, renders moot the issue of which corporate Respondent should be individually liable.[14] 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 shall revoke License No. ROC168614, Class C-34 previously issued to Respondent Quadro Inc. and License No. 130033, Class B- previously issued to Respondent Bellamonte Homes Inc. It is further recommended that, if before the effective date of the order, the Registrar receives written proof from Respondents that they have paid $2,636.45 to Complainant Klein Enterprises Inc. dba Carpet Rite by cashier’s or certified check, the Registrar shall not revoke Respondents’ licenses but, instead, shall close the complaints in Case Nos. 09-2534 and 09-2534W. Done this day, September 3, 2009.

______________________________________ Diane Mihalsky Administrative Law Judge

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

William A. Mundell, Director Registrar of Contractors c/o Legal Department 3838 N. Central Ave. Phoenix, AZ 85012

By ___________________________ ----------------------- [1] See 32-1101 et seq. [2] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [3] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [4] See A.A.C. R2-19-119(B)(2). [5] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [6] Black’s Law Dictionary at page 1220 (8th ed. 1999). [7] Hawkins v. State of Arizona, Department of Economic Security, 183 Ariz. 100, 103, 900 P.2d 1236, 1239 (App. 1995) (quoting Gilbert v. Board of Medical Examiners, 155 Ariz. 169, 174, 745 P.2d 617, 622 (App. 1987)). [8] Hunter Contracting Co. v. Sanner Contracting Co., 16 Ariz. App. 239, 243, 492 P.2d 735 (1972). [9] The Arizona Court of Appeals has held:

The doctrine of “collateral estoppel” is a doctrine of issue preclusion. It bars a party from relitigating an issue identical to one he has previously litigated to a determination on the merits in another action. The elements necessary to invoke collateral estoppel are: the issue is actually litigated in the previous proceeding, there is a full and fair opportunity to litigate the issue, resolution of such issue is essential to the decision, there is a valid and final decision on the merits, and there is a common identity of the parties.

Gilbert, 155 Ariz. at 169, 745 P.2d at 622 (quoted in Hawkins, 183 Ariz. at 103, 900 P.2d at 1239). [10] 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.” [11] See A.R.S. § 32-1154(C). [12] See A.R.S. § 32-1154(A)(21). [13] See A.R.S. § 32-1122(E). [14] The Administrative Law Judge notes that Respondent Bellamonte Homes Inc.’s license was suspended by operation of law when its qualifying party subcontracted to Complainant the carpet installation job.

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