ALJDEC decisions subject to certification as final

2009A-137429480-ROC · Registrar of Contractors · 2010-09-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: August 19, 2010 at 8:00 a.m. APPEARANCES: Complainant Argosy Electric, L.L.C. did not appear; Respondent Pillar Group, Inc. appeared through Alan K. Hyde, Esq., Holm Wright Hyde & Hays, P.L.C. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On September 3, 2003, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC188511, Class K-11 for dual electrical contracting to Complainant Argosy Electric, L.L.C. Complainant’s address of record is 12548 W. Monterosa Dr., Litchfield Park, AZ 85340-5565. On April 4, 2006, the Registrar issued License Nos. ROC217990, Class A for commercial general engineering and ROC217991, Class B-1 for commercial general contacting to Respondent Pillar Group, Inc. On January 2, 2009, the Registrar received Complainant’s complaint against Respondent, which alleged that Respondent owed Complainant $39,031.68 for electrical work that it performed under a subcontract. The Registrar designated Complainant’s complaint against Respondent’s licenses as Case Nos. 09-3742 and 09-3742W. Complainant attached to its complaint in Case Nos. 09-3742 and 09-3742W a copy of its attorney’s disclosure statement in Pinal County Superior Court Case No. CV2008-02216, which involved Complainant’s civil claims against Respondent for the same alleged debt. Complainant requested a hearing on Case Nos. 09-3742 and 09-3742W and the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(7) and (11). Respondent timely answered the Citation and Complaint in Case Nos. 09-3742 and 09-3742W, denying any statutory violations and affirmatively alleging that it was unable to pay because the owner of the project had not paid Respondent for Complainant’s work. The Registrar referred Case Nos. 09-3742 and 09-3742W to the Office of Administrative Hearings (“the OAH”), an independent agency, to schedule and to conduct a fair hearing. A hearing was held on February 10, 2010, before Administrative Law Judge (“ALJ”) Eric A. Bryant in Case Nos. 09-3742 and 09-3742W. Respondent did not appear at the hearing. Complainant appeared through member Paul Noe. ALJ Bryant made a recommended decision to the Registrar in Case Nos. 09-3742 and 09-3742W, finding that Complainant had obtained a civil arbitration award in Pinal County Case No. CV2008-02216 in the amount of $39,031.68 against Respondent, and concluding that Respondent violated the charged statutes by failing to pay this amount to Complainant. On March 17, 2010, the Registrar accepted ALJ Bryant’s recommended decision in Case Nos. 09-3742 and 09-3742W and ordered that Respondent’s licenses be revoked unless it paid Complainant $39,031.68. Respondent filed a petition for rehearing in Case Nos. 09-3742 and 09- 3742W because, prior to the hearing, the parties’ attorneys had agreed that Complainant would withdraw the complaint and request that the Registrar dismiss it with prejudice. Respondent attached to the petition a copy of an e-mail exchange between the parties’ attorneys, confirming the settlement. ALJ Bryant issued an order recommending that the Registrar grant the petition for rehearing in Case Nos. 09-3742 and 09-3742W because “Respondent’s counsel did not appear because he reasonably believed that the complaint would be withdrawn.” On June 24, 2010, the Registrar issued an order granting Respondent’s petition for rehearing, to be scheduled in the expedited course of docketing, and referred the rehearing to the OAH. The Registrar renumbered Case Nos. 09-3742 and 09-3742W as Case Nos. 2009- 37423346 and 2009-[number redacted], respectively. On July 12, 2010, the Registrar issued Notices of Rehearing in Case Nos. 2009-37423346 and 2009-[number redacted], setting a rehearing on August 19, 2010. The Registrar mailed copies of the Notices of Rehearing to Complainant at its address of record and to its attorney. Although the beginning of rehearing was delayed fifteen minutes to allow Complainant additional travel time, it did not appear through a duly authorized member or attorney and did not contact the OAH to request a continuance or that the time for the start of the rehearing be further delayed. Complainant did not present any evidence at the rehearing to prosecute its complaint against Respondent. Respondent appeared through its attorney. Respondent presented the testimony of Alisa Ardavin, an officer, and submitted one exhibit. Hearing Evidence In October 2007, Respondent entered into a Subcontract Agreement and Supplemental Subcontract Agreement with Complainant for the electrical work on a commercial project in Queen Creek, Arizona, called “Ocotillo Trails Shops ‘A.’” The owner of the project was Dmytro Program Management. Both the Subcontract Agreement and the Supplemental Subcontract Agreement incorporated by reference the Master Subcontractor Agreement, which Complainant also signed. Section 5.6 of the Master Subcontractor Agreement provided that “payment by Owner to Contractor is an express condition precedent to any correspondent payment obligation hereunder by Contractor to Subcontractor.” Ms. Ardavin testified that Respondent lacked the capacity to pay Complainant for its electrical work on the Ocotillo Trails Shops “A” project. Ms. Ardavin also testified that Dmytro Program Management had not paid Respondent for Complainant’s electrical work on the Ocotillo Trails Shops “A” project. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] The Notices of Rehearing that the Registrar mailed to Complainant at its address of record and to its attorney were reasonable. Complainant is deemed to have received notice of the rehearing.[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] “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.R.S. § 32-1154(A)(11) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license the following: Failure 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 or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

[Emphasis added.] A general contractor’s inability to pay and nonpayment by the owner on a project are affirmative defenses that the general contractor bears the burden to prove in a subcontractor’s administrative complaint under A.R.S. § 32-1154(A)(11). Respondent has established that it lacks the ability to pay Complainant. Respondent also has established that the owner has not paid Respondent the work for which Complainant sought payment in its administrative complaint to the Registrar. Therefore, the evidence does not establish that Respondent violated A.R.S. § 32-1154(A)(11) or (7)[6] by failing to pay Complainant the monies claimed in the complaint to the Registrar. RECOMMENDED ORDER Based on the foregoing, it is recommended that, on the effective date of the Registrar’s final order in this matter, the Registrar dismiss Case Nos. 2009-37423346 and 2009-[number redacted] against Respondent Pillar Group, Inc.’s License Nos. ROC217991, Class B-1, and ROC217990, Class A. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty days from the date of certification. Done this day, September 1, 2010.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [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] This statutory subsection formerly included 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.” The former statute applies to this complaint.

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