ALJDEC decisions subject to certification as final

2010A-27390227-ROC · Registrar of Contractors · 2010-09-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 2, 2010 at 1:00 p.m. APPEARANCES: Complainant The Pride of Arizona Publications, L.L.C. appeared through Ray Arrona, member; Respondent Green Desert Artificial Golf and Grass Systems, Inc. appeared through Martin Martinez, qualifying party and president. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On July 22, 2004, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC198212, Class C-21R for residential landscaping to Respondent Green Desert Artificial Golf and Grass Systems, Inc. Respondent specializes in installing artificial turf for putting greens and other residential purposes. Complainant The Pride of Arizona Publications, L.L.C. provides targeted bulk advertisements to businesses. Three times a year, in winter, spring, and fall, Complainant printed and mailed decks of 5” x 7” cards advertising individual businesses to selected homeowners in high-income neighborhoods. On February 16, 2010, the Registrar received a complaint from Complainant against Respondent that alleged that Respondent had failed to pay Complainant $5,496.25 for advertising services pursuant to a contract entered into on January 8, 2009. On February 26, 2010, the Registrar received Complainant’s request for hearing because at the time Respondent had only paid $50.00 and stated that it did not intend to pay the remainder of its account. On May 19, 2010, the Registrar issued a Citation and Complaint against Respondent, charging a violation of A.R.S. § 32-1154(A)(11). Respondent timely filed a written answer to the Citation and Complaint, denying any statutory violation. Respondent affirmatively alleged that it asked Complainant to cancel the mailing and agreed to purchase the cards at Complainant’s cost, but Complainant did not provide the cards or proof that the cards had been mailed to homeowners. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, to schedule and conduct a fair hearing. A hearing was held on September 2, 2010. Complainant presented the testimony of two witnesses: (1) Jim MacMillan, the principal of Doppel Print, the company to whom Complainant contracted the graphics and artwork for its client’s cards in the advertising decks; and (2) Ray Arrona, Complainant’s member and owner. Complainant submitted exhibits. Respondent presented the testimony of Martin Martinez, its president and qualifying party. Respondent submitted five exhibits. Hearing Evidence On January 8, 2009, Mr. Martinez, on behalf of Respondent, signed a contract with Complainant to place advertisements in the winter, spring, and fall mailings, at a cost of $5,500.00 per mailing, for a total of $16,500.00, plus tax. Complainant’s winter mailing went out with Respondent’s advertisement. Respondent paid for the winter mailing according to the contract terms. Complainant informed its customers that the deadline to approve artwork for advertisements to be included in the spring mailing was March 9, 2009. If a customer does not approve artwork by the deadline, the entire mailing may be delayed. On March 11, 2009, Mr. MacMillan asked Respondent’s office manager, Bruce, whether it approved the previously submitted artwork. On March 13, 2009, Bruce informed Mr. MacMillan by e-mail that “[p]roof is okay as we discussed.” On March 13, 2009, Mr. Arrona sent Respondent Complainant’s invoice for the first half of the spring mailing in the amount of $2,798.13, and he informed Respondent that the second half would be due on April 20, 2009. On Friday, April 3, 2009, Mr. Martinez informed Mr. Arrona by telephone that Respondent did not wish to participate in Complainant’s spring mailing because the advertisement was “not working for” Respondent’s business. A “heated exchange” followed, during which Mr. Arrona told Mr. Martinez that the cards had already been printed, but had not been collated into decks or mailed. Respondent offered to pay Complainant’s cost for the cards that it had printed for Respondent’s advertisement. Mr. Arrona furnished the contact information for the bulk printer in Minnesota that Complainant used, Schmidt. On April 3, 2009, Respondent obtained an unsigned quote purportedly from Cindy Sheppard at Schmidt that Complainant’s cost for 100,000 5” x 7” cards, including freight to Mesa, Arizona, was $3,998.77. Complainant disputed that Ms. Sheppard had provided Complainant’s cost to Respondent. Complainant submitted a signed letter from Ms. Sheppard dated March 19, 2010, stating that she had been on vacation on April 3, 2009, and never had any direct contact with anyone from Respondent. Mr. Arrona testified that Complainant’s cost was proprietary information that should not have been provided to Respondent in any event. On April 6, 2009, Mr. Arrona sent an e-mail to Mr. Martinez, informing Respondent that Complainant had directed Schmidt to include Respondent’s advertisement in the spring mailing because “[i]t seems silly to have them keep the 100,000 cards of the deck and shipped to you.” On June 22, 2009, Complainant sent Respondent a second invoice for the full amount owed for the spring 2009 mailing, in the amount of $5,596.25. After Complainant filed the complaint to the Registrar, Respondent paid Complainant another $50.00. Complainant did not cash the check. The parties at hearing did not agree as to any total amount owed or that Respondent would make regular payments in any amount. Complainant submitted a deck from the spring 2009 mailing that included Respondent’s advertisement. Complainant also submitted United States Postal Service 3602-R forms for the spring mailing dated April 14, 2009, and April 20, 2009. Respondent disputed that Complainant’s evidence established that Respondent’s advertisement actually had been included in all of the decks. Mr. MacMillan and Mr. Arrona testified that the 3602-R forms set forth the total weight of the mailing and the total number of pieces in the mailing to verify that all of the cards submitted were included in the deck. Respondent also argued that its breach of the parties’ contract was excused by Complainant’s failure to honor its exclusivity agreement that the mailing would not include any advertisements for businesses that were similar to Respondent’s. Respondent submitted advertisements for Landscape Construction Service and Turkish Travertine Pavers that were included in the spring 2009 deck. Although the artwork on both advertisements showed grassy areas, neither advertisement mentioned artificial turf, unlike Respondent’s. CONCLUSIONS OF LAW Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[1] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] A.R.S. § 32-1154(A)(11) 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 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.) The Registrar regulates some aspects of contractors’ advertising, including requiring licensed contractors to place their license numbers on advertising[4] and requiring contractors who are exempt from licensure requirements to disclose their unlicensed status on advertising.[5] The Registrar also may penalize a contractor’s license based on false or misleading advertising that may harm a member of the public.[6] All of these statutes protect the public, not the person who publishes or disseminates the contractor’s advertising. “[A]dministrative powers are limited to those granted by a constitution or statute. . . . No administrative agency can give itself powers not expressly granted it by legislation.”[7] The legislature has not vested the Registrar with the authority to review and discipline a contractor for its own or its employees’ acts that do not involve contracting as defined by statute.[8] Respondent’s advertisement in Complainant’s spring 2009 deck complied with all statutory requirements, was factually accurate, and did not potentially harm any member of the public. The contract between the parties did not relate to any specific job on which Respondent worked as a contractor. The advertising services that Respondent agreed to have Complainant provide are general business services whose purpose was the same regardless of the nature of the business, to wit, to solicit members of the public to patronize the advertiser’s business, regardless of whether that business involved entertainment, health and beauty, retail sales, other professional or personal services, or contracting. Under the foregoing authorities, because the services described in the contract between Complainant and Respondent did not involve contracting as that term has been defined by A.R.S. § 32-1101(A)(3),[9] the Registrar lacks jurisdiction to resolve Complainant’s complaint for Respondent’s alleged breach of the contract. Therefore, the Registrar should dismiss Complainant’s complaint, without prejudice to the parties’ right to resolve their contractual dispute in a court of competent civil jurisdiction. 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 for lack of jurisdiction Complainant The Pride of Arizona Publication, L.L.C.’s complaint in Case No. 2010-27390227 against Respondent Green Desert Artificial Golf and Grass Systems, Inc.’s License No. ROC198212, Class C- 21R. 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 21, 2010. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: William A. Mundell, Director Registrar of Contractors ----------------------- [1] 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). [2] See A.A.C. R2-19-119(B)(2). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [4] See A.R.S. § 32-1124(B). [5] See A.R.S. § 32-1121(A)(14)(c). [6] See A.R.S. § 32-1154(A)(16); see also Beazer Homes v. Arizona, Inc. v. Goldwater, 196 Ariz. 98, 101, 993 P.2d 1062, 1065 (App. 1999). In Beazer, the Arizona Court of Appeals upheld the Registrar’s jurisdiction to conditionally revoke a contractor’s license based on a misrepresentation by the real estate salesperson that the contractor employed to sell the homes that it constructed in a complaint filed by an injured homeowner, even though the Arizona Department of Real Estate also had power to sanction the real estate salesperson’s license. [7] Corella v. Superior Court, 144 Ariz. 418, 420, 698 P.2d 313, 315 (App. 1985) (citations omitted). [8] See Beazer, 196 Ariz. at 101, 993 P.2d at 1065. [9] This statute defines “contractor” as follows:

"Contractor" is synonymous with the term "builder" and means any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that, for compensation, undertakes to or offers to undertake to, purports to have the capacity to undertake to, submits a bid or responds to a request for qualification or a request for proposals for construction services to, does himself or by or through others, or directly or indirectly supervises others to: (a) Construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction. (b) Connect such structure or improvements to utility service lines and metering devices and the sewer line. (c) Provide mechanical or structural service for any such structure or improvements.

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