ALJDEC decisions subject to certification as final

09F-2584-ROC · Registrar of Contractors · 2009-10-13

STATE OF ARIZONA OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 18, 2009 (record held open to September 22, 2009)

APPEARANCES: Complainant was represented by attorney Guy W. Bluff, accompanied by the company’s Qualifying Party Charles Gierhart; Respondent was represented by attorney Andrew Peshek, accompanied by sole proprietor Kia Ty Lam.

WITNESSES: For Complainant: Charles Gierhart Jeff Dupre, Polar Cooling Sean Gilboy, Omega Test & Balance Kevin Rentz, Project Manager

For Respondent: Kia Ty Lam Dat Nguyen, Respondent employee Dan Gill, Engineer

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant Premier Homes, Inc. brings this action claiming that Respondent Kia Ty Lam dba Kia’s Air Conditioning and Heating abandoned a subcontract, acted wrongfully and harmed Complainant, and failed to pay material suppliers. Respondent denies all allegations. This tribunal entered the complaint file received from the Registrar of Contractors into the record, along with Complainant’s Exhibits 1 through 48. The parties presented evidence and testimony from the witnesses listed above. At the end of the hearing, the parties requested written closing argument. The record was held open to September 22, 2009 to allow for the filing of briefs. Based upon the entire record, including the written arguments, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Decision finding no violation of Arizona contractor-licensing law because this matter presents a good faith contractual dispute between the parties and does not show conduct that should be disciplined. FINDINGS OF FACT 1. Respondent Kia Ty Lam dba Kia’s Air Conditioning and Heating is the holder of a class L-39 license (No. 093826), a specialty commercial contracting license issued by the Registrar of Contractors (“ROC”). It authorizes Respondent to perform installation and repair of refrigeration and evaporative cooling systems for commercial construction.[1] Kia Lam is Respondent’s Qualifying Party and sole proprietor. Hereinafter, “Respondent” will refer to either the business or Kia Lam or both, depending on context. 2. In June 2007, Complainant hired Respondent as a subcontractor to install an HVAC system in a Holiday Inn Express that Complainant was building. The contract set out the scope of work and many other terms, but did not include a specific date of completion.[2] 3. Respondent performed work on the project and was paid regularly through December 2007. At that time, Complainant informed Respondent that Respondent was severely behind schedule and that it was bringing in other contractors to get Respondent’s work completed. Respondent stayed on the job, but two other subcontractors were brought in to redo and complete Respondent’s scope of work. 4. Charlie Gierhart, Complainant’s founder and Qualifying Party, testified that the original deadline for the project had been December 20, 2007. This was so that the hotel would be open in time for the Holidays, the New Year, and the Fiesta Bowl. Complainant maintains that Respondent’s delays and failure to have enough men on the job caused Complainant to miss that deadline. When it became clear that the December 20 deadline was not going to be met, the owner extended the deadline into January 2008, in time for the Super Bowl that was to be held in early February in Glendale, Arizona. With the extra subcontractors on the job, Complainant met that deadline. Complainant claims that Respondent’s slow work and poor work caused the delay and caused Complainant to incur extra costs for completing the job. Complainant also claims that Respondent failed to coordinate with other trades and caused problems and delays on the job. Complainant put on testimony and evidence concerning those claims. 5. Respondent disputes those claims. Respondent put on testimony and evidence disputing that he was informed about the deadline, that he was told that more workers were needed to keep to the schedule, and that he, and not the general contractor Complainant, was responsible for coordinating with other trades. There is evidence that Kia Lam went to Vietnam to visit family during the project, but it is disputed and not clear as to whether it was in November or in December. It is also not clear whether this was a material breach of contract. 6. The evidence put forth at the hearing shows a good faith contractual dispute between the parties.[3] CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[4] Further, the standard of proof at hearing is by preponderance of the evidence.[5] Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[6] Complainant has not met that burden. 2. The Citation and Complaint alleges violations of Arizona Revised Statutes (A.R.S.) § 32-1154(A)(1), (A)(7), and (A)(11). Subsection (A)(1) prohibits abandonment of a contract without legal excuse. Subsection (A)(7) prohibits wrongful acts that substantially harm another. Subsection (A)(11) prohibits failure to pay more than $750 when due and owing. 3. The evidence is not sufficient to show that Respondent has violated those statutes cited in the Citation and Complaint. 4. Complainant’s main contention is that Respondent breached its contract with Complainant. While a breach of contract may be considered a wrongful act under subsection (A)(7), not all breaches of contract are wrongful such that they should result in discipline of a contractor’s license. Parties to a contract may have a good faith dispute about their obligations under the contract that would be appropriate for a civil court action but would not rise to the level of wrongful conduct that is the basis of a disciplinary violation. A good faith dispute about contractual obligations should not result in disciplinary action against a license. Those disputes can be taken to court. Here, it could be that Respondent is in breach of contract,[7] but even if so, Respondent has a good faith position that he is not in breach of contract. Under these circumstances, Complainant may be able to prove its breach of contract case in civil court, but Respondent’s actions do not rise to the level of “wrongful” for which Respondent should be disciplined. 4. Complainant has failed to show a violation by Respondent of the contractor-licensing statutes. 5. This matter should be dismissed.

. . .

RECOMMENDED ORDER Based on the foregoing, it is hereby recommended that the Citation and Complaint against Respondent Kia Ty Lam dba Kia’s Air Conditioning and Heating in case 09-2584 be dismissed.

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 40 days from the date of that certification.

Done this 29th day of September2009.

Office of Administrative Hearings

______________________________ Eric A. Bryant Administrative Law Judge

Copy mailed 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, Arizona Revised Statutes § 32-1102 and Arizona Administrative Code R4-9-102 for a description of commercial contracting license classifications and scope of work. [2] Exhibit 6. The contract references a “Project Schedule” (p. 3) and a “Baseline Construction Schedule” (item 2 in Exhibit D attached to the contract), but neither of these documents are part of the record. [3] Complainant had ample opportunity at the hearing to show that this case was more than a good faith contractual dispute. [4] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [5] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [6] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). [7] This tribunal makes no such finding.

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