ALJDEC decisions subject to certification as final

2009A-52139350-ROC · Registrar of Contractors · 2012-01-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 23, 2011, at 8:00 a.m. APPEARANCES: Complainant Dana Wiggin represented herself and her husband, Troy Wiggin; Respondent Odessa Construction, L.L.C. was represented by Joel E. Sannes, Esq., Lake & Cobb, P.L.C. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In June 2004, the Arizona Registrar of Contractors (“the Registrar”) issued License No. A.196489-C for commercial general engineering to Odessa Construction, L.L.C. (“Respondent”). On or about April 9, 2009, the Registrar received a complaint from Troy Wiggin (“Complainant” or “Mr. Wiggin”) against Respondent. Complainant requested that Respondent be required to return an $8,000.00 “deposit” that he paid for a water line extension at 5419 East Olesen in Cave Creek, Arizona (“the project”) pursuant to a “bid” that Respondent submitted on November 1, 2007, because Respondent never started the project. The Registrar designated the complaint as Case No. 09-5213. On August 18, 2009, the Registrar issued a Citation and Complaint in Case No. 09-5213 against Respondent, charging violations of A.R.S. § 32- 1154(A)(1), former (7), and (13), namely, A.R.S. § 32-1124(B). On November 27, 2009, the Registrar issued a default Decision and Order in Case No. 09-5213, finding that Respondent had failed to file a written answer to the Citation and Complaint and that pursuant to A.R.S. § 32- 1155(B), Respondent’s failure was deemed an admission of the charges contained in the Citation and Complaint. As a result of Respondent’s admitted violations, the Registrar suspended Respondent’s license until Respondent paid Complainant $8,000.00. Respondent appealed the Registrar’s November 27, 2009 Decision and Order in Case No. 09-5213 to Maricopa County Superior Court. On April 19, 2011, the Honorable Crane McClennan issued a minute entry order in Case No. LC2010- 000490-001 DT. Based on Mr. Wiggin’s failure to file a responsive brief, Judge McClennan vacated the Registrar’s November 27, 2009 Decision and Order, remanded Case No. 09-5213, and ordered that the Registrar permit Respondent to file a written answer to the Citation and Complaint. The Registrar redesignated Case No. 09-5213 as Case No. 2009-52139350. On August 1, 2011, the Registrar issued an Order in Case No. 2009-52139350, formerly 09-5213, allowing Respondent to file a written answer to the Citation and Complaint. Respondent filed a timely written answer to the Citation and Complaint in Case No. 2009-52139350, formerly 09-5213, denying any statutory violations. The Registrar referred Case No. 2009-52139350, formerly 09-5213, to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. On December 23, 2011, a hearing was held in the OAH in Case No. 2009- 52139350, formerly 09-5213. Complainants submitted five exhibits and presented the testimony of two witnesses: (1) Mr. Wiggin; and (2) Dana Wiggin, Mr. Wiggin’s wife and a co-owner of the property where Respondent was to construct the project. At the hearing, the Administrative Law Judge added Dana Wiggin as an additional party complainant. Respondent submitted seven exhibits and presented the testimony of Gunther Herrmann, Respondent’s qualifying party and member. Hearing Evidence Mr. and Mrs. Wiggin owned a parcel of undeveloped rural real property at 5419 East Olesen in Cave Creek. The property did not have access to city water. Mr. and Mrs. Wiggin planned to extend the water line from their neighbor’s property, to subdivide the parcel into two lots, and to build two houses on the subdivided parcel. On July 27, 2007, Mr. Wiggin’s civil engineer submitted a second set of drawings to the City of Phoenix Water Services Department, Distribution & Collection Engineering Division (“the City”). Although the City had not yet issued a final approval, Mrs. Wiggin testified that she thought a final approval of the July 27, 2007 plans would be forthcoming. On November 1, 2007, Respondent submitted a proposal to extend the water line at the project to Mr. Wiggin as “developer.” The proposal incorporated Mr. Wiggin’s engineer’s July 27, 2007 drawing, specified the six-inch water pipe shown on the drawing, and stated that “NO changes made in drawings.” If changes were made in the plans, the November 1, 2007 proposal stated that additional charges would result. Respondent’s November 1, 2007 proposal excluded bonding and permits. The amount of Respondent’s November 1, 2007 proposal was $15,550.00. The proposal did not provide for a deposit, but noted that “full payment due upon completion of job.” On November 1, 2007, Mr. Wiggin signed as “Owner Developer” to accept Respondent’s November 1, 2007 proposal. After Mr. Wiggin accepted Respondent’s proposal, it became the parties’ contract. On or about November 20, 2007, Respondent mobilized to start the project. The mobilization consisted of sending a three-man crew, water truck, backhoe, and materials, including 6-inch pipe, to the project site. Mr. Herrmann testified that Mr. Wiggin contacted him and asked Respondent to mobilize because Mr. Wiggin was in a hurry to finish the two houses. Mr. Herrmann testified that he asked Mr. Wiggin if a final permit had been obtained and Mr. Wiggin assured him it had. Mr. Herrmann testified that he has been doing utilities for 35 years and that Respondent never mobilized unless the owner, developer, or general contractor stated that the job was ready. Mr. Wiggin denied that he ever asked Mr. Herrmann to have Respondent mobilize. Mr. Wiggin testified that he was in no hurry to provide water to the two houses. Mrs. Wiggin testified that Respondent “just showed up,” but that she was not surprised because pipe materials were on site for the project. Mr. Wiggin acknowledged that the houses passed rough framing, rough mechanical, rough plumbing, rough electrical, and lathe inspections in September 2007, and passed underground electrical, plumbing, and mechanical inspections in December 2007. Mr. Wiggin also acknowledged that he expected the houses to be complete in February 2008, and that water would be necessary for either house to pass final inspection. Mr. Herrmann testified that one house was “totally done” and that the other house was done through the drywall stage when Mr. Wiggin asked Respondent to mobilize to construct the water line extension. On November 20, 2007, Mr. Herrmann sent a facsimile to Mr. Wiggin, stating that although Respondent was “ready to start now and get it done ASAP,” no surveying was done. Mr. Herrmann asked to be informed when the City inspector who would be in charge of the water line extension had been notified so that Respondent could get started. Mr. Herrmann also asked for an $8,000.00 payment for the materials that Respondent had delivered to the site. On or about November 29, 2007, Complainants issued an $8,000.00 check to Respondent. Several days later, Complainants received a letter from the City that was dated November 28, 2007, changing the specifications for the project, including requiring 8” pipe and a longer water line. Mr. Wiggin’s civil engineer prepared revised drawings to comply with the City’s changed requirements. On September 3, 2008, the City issued a permit based on the revised drawings. On October 4, 2008, Respondent submitted a proposal to Mr. Wiggin, revising the November 1, 2007 contract to include 8” water pipe and a longer line, for a lump sum amount of $35,783.00. Mr. Wiggin did not sign the October 4, 2008 proposal. Complainants’ construction lender informed them that they would have to obtain additional bids because it would only loan them $26,000.00 for the water line extension. Complainants informed Mr. Herrmann of their lender’s limit. On October 25, 2008, Respondent submitted a proposal to Mr. Wiggin revising the October 4, 2008 proposal to provide a lump sum amount of $26,000.00. The October 25, 2008 proposal stated that “all credits applied from previous contract $8,000.00.” Mr. Wiggin did not sign the October 25, 2008 proposal. On November 4, 2008, Respondent amended the October 25, 2008 proposal to require a payment of $17,500.00 to restart the project. On November 4, 2008, Mr. Herrmann sent a facsimile to Mr. Wiggin, informing him that the October 25, 2008 lump sum amount was based on deducting the previous $8,000.00 payment from the $35,783.00 lump sum amount on the October 4, 2008 proposal, for a balance of $27,783.00, and deducting an additional amount to meet the lender’s limit. Mr. Hermann explained that because Respondent had incurred substantial expenses for the November 20, 2007 mobilization, it would not absorb these expenses or deduct additional monies from the $26,000.00 lump sum amount of the October 25, 2008 proposal. On November 25, 2008, Mrs. Wiggin sent a letter to Respondent, terminating the parties’ contract and requesting that Respondent return the $8,000.00 “deposit” that Complainants had paid on November 29, 2007. Neither the November 1, 2007 contract, the October 4, 2008 proposal, nor the October 25, 2008 proposal showed Respondent’s license number preceded by the acronym “ROC.” According to the Registrar’s electronic record, Respondent’s license was cancelled on May 2, 2011. Complainants’ complaint appears to be the only complaint pending against the license. CONCLUSIONS OF LAW The cancelled status of Respondent’s license does not deprive Complainants of their right to prosecute their complaint against Respondent or prevent the Registrar from determining the merits of Complainants’ complaint.[2] The Registrar has jurisdiction to determine whether Respondent violated the charged statutes.[3] Complainants bear the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.[4] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[5] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[6] Respondent established that it was ready, willing, and able to perform its November 1, 2007 contract with Mr. Wiggin. Respondent also established that the City’s initial failure to issue a permit and Complainants’ subsequent refusal to modify the contract to comply with the City’s additional requirements prevented Respondent from fully performing the contract. Therefore, Complainants did not establish that Respondent abandoned the contract in violation of A.R.S. § 32-1154(A)(1).[7] Complainants did not establish that the $8,000.00 that they paid to Respondent on November 29, 2007, was a refundable deposit. Instead, Respondent established that Complainants made the $8,000.00 payment to reimburse Respondent for its mobilization costs, in anticipation that the City would shortly issue a permit that would allow Respondent to complete the project for the total amount of $15,500.00. Therefore, Complainants did not establish that Respondent by refusing to return the $8,000.00 committed a wrongful or fraudulent act in violation of former A.R.S. § 32- 1154(A)(7).[8] Respondent established that it incurred some costs in the November 20, 2007 mobilization. Although Complainants may be entitled to a refund of some of the money paid to Respondent under a common-law theory of quantum meruit, such claim must be resolved in a court of competent jurisdiction, not in an administrative complaint to the Registrar. The evidence established that Respondent violated A.R.S. § 32-1154(A)(13), namely A.R.S. § 32-1124(B).[9] Because Respondent is no longer in business, it cannot prospectively modify the proposal forms that it uses in its contracting business to include its license number preceded by the acronym “ROC.”[10] Therefore, a conditional penalty is not appropriate. RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the Registrar’s final order, the Registrar dismiss Complainants Troy Wiggin and Dana Wiggin’s complaint in Case No. 2009-52139350, formerly 09-5213, against Respondent Odessa Construction, L.L.C.’s License No. A.196489-C. 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 day, January 10, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Mrs. Wiggin owns the real property where Respondent contracted to construct the project with her husband, the original party complainant. The Administrative Law Judge amended the caption at the hearing to allow Mrs. Wiggin to represent Complainants.

[2] See A.R.S. § 32-1154(C). That statute provides that “[t]he expiration, cancellation, suspension or revocation of a license . . . shall not deprive the registrar of jurisdiction to proceed with any investigation of or action or disciplinary proceeding against such license, or to render a decision suspending or revoking such a license . . . .” [3] See 32-1101 et seq. [4] 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). [5] See A.A.C. R2-19-119(B)(2). [6] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [7] A.R.S. § 32-1154(A)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [8] A.R.S. § 32-1154(A)(7) 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.” [9] A.R.S. § 32-1154(A)(13) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” A.R.S. § 32-1124(B) requires that licensed contractors include their license number “preceded by the acronym ‘ROC’“ on “all written bids submitted by the licensee and . . . on all advertising, loan forms, lending institution forms, letterheads and other documents used by the licensee in the conduct of business regulated by this chapter.” [10] According to the Registrar’s electronic record, Mr. Herrmann is listed on License No. KB-1.184955-D issued to Boulder Construction Corporation and that license is current and in good standing. Mr. Herrmann is encouraged to ensure Boulder Construction Corporation’s business forms and practices conform to the Registrar’s statutes.

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