ALJDEC decisions subject to certification as final

2010A-28252570-ROC · Registrar of Contractors · 2010-10-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 22, 2010 at 8:00 a.m. APPEARANCES: Complainant Exteriors by Chad Robert, Inc. appeared through Charles J. Morrow, Esq., Galbut & Galbut, P.C.; Respondent Elisan, Inc. did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On October 21, 1998, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC130544, Class C-21 for residential landscaping and irrigation systems to Complainant Exteriors by Chad Robert, Inc. On July 9, 2004, the Registrar issued License No. ROC197851, Class KA for dual engineering to Respondent Elisan, Inc. Dolores Sanchez[1] is listed as Respondent’s qualifying party; Mr. Sanchez and Humberto Elizondo are listed as officers. Respondent’s address of record is 5177 W. Muriel Dr., Glendale, Arizona 85308-5309. On February 23, 2010, the Registrar received a complaint from Complainant against Respondent, alleging that Respondent owed Complainant $201,416.43 for a project at 5911 East Valley Vista Lane in Paradise Valley, Arizona. According to the complaint, Complainant contracted with the owner of the residential property to perform extensive landscaping and entered into three subcontracts with Respondent for it to construct the hardscape, perform planting, and construct an irrigation system on the project. The total amount of the three subcontracts was $822,206.00. Complainant paid Respondent $712,532.00, and Respondent walked off the job, leaving the project incomplete and poorly constructed. Complainant attached to its complaint to the Registrar a copy of its 21- page, 206-paragraph complaint against Respondent, Mr. Sanchez, and Mr. Elizondo in Maricopa County Superior Court Case No. CV2009-036427, filed on November 16, 2009 (“the civil complaint” or “the civil action”). The civil complaint alleged that Respondent had breached the subcontracts by failing to timely or adequately construct the project, that Mr. Sanchez misrepresented Respondent’s qualifications and the status of its performance, and that the subcontracts allowed Complainant, upon Respondent’s breach, to hire other contractors to complete the project. The civil complaint stated claims against Respondent for beach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment, against Mr. Sanchez for fraud, slander, injurious falsehood/disparagement, and against Mr. Elizondo for aiding and abetting fraud, slander, and injurious falsehood/disparagement. Complainant also attached to its complaint to the Registrar a copy of the default judgment that the court entered against Respondent, but not Mr. Sanchez or Mr. Elizondo, in the civil action on February 23, 2010, awarding Complainant $201,416.43 in damages, $13,150.00 in attorneys’ fees, and $494.30 in costs. On May 19, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(11) and (17). Complainant did not ask the Registrar to amend the Citation and Complaint to charge any additional statutory violations. Respondent filed a timely written answer to the Citation and Complaint, denying any statutory violations. Respondent attached to its written answer a copy of Mr. Sanchez’ and Mr. Elizondo’s attorney’s separate answer to the civil complaint, denying all complaint allegations of wrongdoing against Mr. Sanchez and Mr. Elizondo. The Registrar referred the matter to the Office of Administrative Hearings (“OAH”), an independent agency, for an evidentiary hearing. On July 20, 2010, the Registrar issued a Notice of Hearing, setting a hearing on September 7, 2010, at 8:00 a.m. The Registrar mailed a copy of the Notice of Hearing to Respondent’s address of record. On July 28, 2010, the Administrative Law Judge, at Complainant’s request, continued the hearing to September 22, 2010, at 8:00 a.m. Staff at the OAH mailed a copy of the order continuing the hearing to Respondent at its address of record. On September 7, 2010, Respondent submitted a subpoena for witness Mario Parra, commanding him to attend the continued hearing on September 22, 2010, at 8:00 a.m. After the OAH issued the subpoena, on September 16, 2010, Respondent submitted proof to OAH that the subpoena had been served on Mr. Parra. A hearing was held on September 22, 2010 at 8:00 a.m. Complainant presented the testimony of its qualifying party and president, Chad Robert, and submitted six exhibits. Although the beginning of the hearing was delayed fifteen minutes to allow Respondent additional travel time, it did not appear, through an attorney or officer. Respondent did not contact the OAH to request a continuance or that the start of the hearing be further delayed. No witness appeared on Respondent’s behalf, and it did not present any evidence to defend its license. According to the Registrar’s record, on or about July 31, 2010, Respondent’s license was suspended as a matter of law for non-renewal. Hearing Evidence Complainant presented evidence to establish the factual allegations in the civil complaint. According to Complainant, Respondent had demanded additional money to complete the job and, when Complainant declined to pay additional money, had walked off the job. Mr. Robert testified that Complainant had overpaid Respondent at the time it walked off the job. Mr. Robert testified that Respondent’s workmanship was deficient and Complainant hired other contractors to perform warranty work and to complete the project. Mr. Robert submitted spreadsheets to establish that Respondent’s various breaches of the subcontracts by failing to complete or to repair the work that the subcontracts required caused Complainant to incur damages in the amount of $188,199.67. Complainant argued that Respondent’s breaches of the subcontracts constituted violations of A.R.S. § 32-1154(A)(1), (9), and (11). CONCLUSIONS OF LAW 1. The Notice of the Hearing and notice of the continued hearing that were mailed to Respondent at its address of record were reasonable, and it appears that Respondent actually received notice of the continued hearing.[2] 2. Complainant bears the burden of proof and must establish Respondent’s contracting law violations by a preponderance of the evidence.[3] 3. The Administrative Hearings Procedure Act required the Registrar to include in its Citation and Complaint “[a] statement of the legal authority and jurisdiction under which the hearing is to be held.”[4] “Procedural due process requires notice and an opportunity to be heard in a meaningful manner and at a meaningful time.”[5] Under the circumstances of this case, the Administrative Law Judge declines to amend the Registrar’s Citation and Complaint. Because A.R.S. § 32-1154(A)(1)[6] and (9)[7] were not charged, the Administrative Law Judge does not recommend that the Registrar take disciplinary action against Respondent’s license for alleged abandonment of the contract or failure to complete the project for the amount stated in the contract. 4. Complainant did not present any evidence that Respondent performed work that was beyond the scope of its KA license. Complainant therefore did not establish that Respondent violated A.R.S. § 32- 1154(A)(17).[8] 5. The parties’ subcontracts required Respondent to furnish materials and services, not to pay anything to Complainant. According to the civil complaint, if Respondent failed to fully perform, the subcontracts allowed Complainant to hire other contractors to repair or complete Respondent’s workmanship and to seek reimbursement from Respondent. In contrast, under the contracting statutes, construction is not a perfect art and, in most complaints of poor or incomplete workmanship, a contractor is afforded an opportunity to correct or complete the project before the Registrar revokes, suspends, or otherwise disciplines the contractor’s license.[9] Therefore, Complainant has not established that Respondent violated A.R.S. § 32-1154(A)(11).[10] 6. With respect to the relief that Complainant requests, because jurisdiction cannot be waived, a tribunal may on its own motion consider whether it has jurisdiction to determine an issue.[11] As noted above, Complainant never asked the Registrar to inspect Respondent’s work or to direct Respondent to repair or complete the work. Complainant’s claimed damages are consequential damages that resulted from its decision to hire other contractors to repair and complete the project,[12] not directly from Respondent’s violation of any contracting law. Because the legislature has not empowered the Registrar to enforce against a contractor’s license a civil judgment that does not involve a contracting law violation or to adjudicate or award consequential damages,[13] the Registrar lacks jurisdiction to resolve Complainant’s breach-of- contract claim or to require Respondent to pay Complainant’s claimed consequential damages as a condition of avoiding revocation of its license. 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 Complainant Exteriors by Chad Robert, Inc.’s complaint in Case No. 2010- 28252570 against Respondent Elisan, Inc.’s License No. ROC197851, Class KA. 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, October 12, 2010. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: William A. Mundell, Director Registrar of Contractors ----------------------- [1] Testimony at hearing established that Respondent’s qualifying party, Delores Sanchez, is a male, who is known by the nickname, “Lolo.”

[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] A.R.S. § 41-1092.05(D)(2). [5] Webb v. Arizona Board of Medical Examiners, 202 Ariz. 555, 558, ¶ 9, 48 P.3d 505, 508 (App. 2002) (citing Comeau v. Arizona State Board of Dental Examiners, 196 Ariz. 102, 106, ¶ 18, 993 P.2d 1066, 1070 (App. 1999)). [6] This statutory subsection 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.” [7] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” [8] This statutory subsection includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[k]nowingly contracting beyond the scope of the license or licenses of the licensee.” [9] See A.R.S. § 32-1154(A)(23) (including among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” [10] This statutory subsection 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 . . . .” [11] Bruce v. State, 126 Ariz. 271, 272, 614 P.2d 813, 814 (1980) (Even where the parties do not question a tribunal’s jurisdiction, “an appellate court will consider jurisdictional questions sua sponte. . . . Jurisdiction cannot be waived and may be raised at any stage of the proceedings.” Citations omitted.). [12] “Consequential damages are such as are not produced without the concurrence of some other event attributable to the same origin or cause; such damage, loss, or injury as does not flow directly and immediately from the action of the party, but only from the consequences or results of such act.” 25 C.J.S., Damages, § 2 at 617 (quoted in State v. Morris, 173 Ariz. 14, 17, 839 P.2d 434, 437 (App. 1992)). [13] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984).

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