ALJDEC decisions subject to certification as final

2010A-308475971-ROC · Registrar of Contractors · 2011-06-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 8, 2011, at 8:00 a.m. APPEARANCES: R K Sanders, Inc. appeared through Robert Kevin Sanders, Sr., qualifying party and officer; N V and Sons Builders, Inc. appeared through Marcy Elissa Golumb, Esq. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In July 2007, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC234782, Class KB-1 for dual building contracting to N V and Sons Builders, Inc. (“N V and Sons”). In March 2008, the Registrar issued License No. ROC242682, Class B-1 for commercial general contracting to R K Sanders, Inc. (“R K Sanders”). On September 21, 2010, the Registrar received a complaint from R K Sanders against N V and Sons that alleged that the parties had entered into a subcontract for N V and Sons to perform light and heavy gauge framing, drywall, painting, and acoustical plaster on a project at Scottsdale Community College Performing Arts Center (“the project”) for a total price of $58,860.00, and that R K Sanders had paid N V and Sons $18,000.00. R K Sanders’ complaint alleged further that N V and Sons abandoned certain portions of the contract, forcing R K Sanders to hire another subcontractor, and that R K Sanders had to augment N V and Sons’ crews to complete other portions of the contract. The Registrar designated R K Sanders’ complaint as Case No. 2010-[number redacted]. On or about November 22, 2010, the Registrar received a complaint from N V and Sons against R K Sanders that alleged that the original subcontract amount for the project was $58,860.00, but that change orders raised the contract amount to $65,800.00, and that R K Sanders had paid N V and Sons only $7,030.06 for work on the project. N V and Sons’ complaint alleged that R K Sanders therefore owed N V and Sons $58,769.94. The Registrar designated N V and Sons’ complaint as Case No. 2010-[number redacted]. Both parties subsequently requested that the Registrar schedule a hearing on their respective complaints. On February 16, 2011, the Registrar issued a Citation and Complaint against N V and Sons in Case No. 2010-[number redacted], charging a violation of A.R.S. § 32-1154(A)(1). On February 16, 2011, the Registrar also issued a Citation and Complaint against R K Sanders in Case No. 2010-[number redacted], charging a violation of A.R.S. § 32-1154(A)(11). N V and Sons and R K Sanders both filed timely written answers, denying any statutory violation. The Registrar consolidated Case Nos. 2010-[number redacted] and 2010-[number redacted] and referred the matters to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on June 8, 2011. R K Sanders submitted 24 exhibits and presented the testimony of two witnesses: (1) Robert Kevin Sanders, Sr., R K Sanders’ officer and qualifying party; and (2) David Curtiss, R K Sanders’ former assistant superintendent and current project manager. N V and Sons submitted four exhibits and presented the testimony of four witnesses: (1) Nikolia Vulaj, N V and Sons’ officer; (2) José Orduno, one of N V and Sons’ painters on the project; (3) Omar Dominguez, N V and Sons’ foreman on the project; and (4) Leo Nicovic, N V and Sons’ project manager. Hearing Evidence The project consisted of a substantial remodel of the Scottsdale Community College Performing Arts Center, including an auditorium and lobby. The owner of the project is the Maricopa County Community College District (“MCCCD”). On or about February 9, 2010, N V and Sons submitted a proposal to R K Sanders for certain work on the project with itemized prices, including interior framing and drywall ($29,652.00), structural framing ($8,000.00), interior hardlids (ceilings), including “1” plaster ceiling in lobby” ($9,558.00), and interior painting ($8,650.00). On or about April 7, 2010, the parties executed R K Sanders’ form subcontract for N V and Sons to perform the work described in its proposal for a lump-sum contract price of $58,860.00.[1] The parties also signed a seven-page single-spaced typewritten Articles of Construction that R K Sanders had prepared. The Articles of Construction required written change orders, signed by R K Sanders, and provided in relevant part as follows: If [N V and Sons] should delay or threaten to delay the progress or performance of its Contract, or cause any actual or potential damage or liability to the [R K Sanders], [N V and Sons] may be deemed in breach of this Contract, and shall indemnify and hold [R K Sanders] harmless from all liability and costs. [N V and Sons] shall bear the costs of all damages done to others and shall be responsible to same of [sic] any damages caused by or resulting from acts and omissions of [N V and Sons].

The only subcontractor on the project performing drywall and framing was N V and Sons. Almost from the beginning, the project was troubled. The plumbing and electrical contractor on the project did not obtain timely inspections of their work. Because the plumbing and electrical systems were inside the walls, the delay in obtaining electrical and plumbing inspections delayed N V and Sons’ installation of drywall. Mr. Sanders and Mr. Curtiss were not on the jobsite at the project every day. R K Sanders’ job superintendents during the time N V and Sons worked on the project, Tim House and Nick Staebell, no longer work for R K Sanders and did not testify at the hearing. R K Sanders submitted e-mails and a 24-hour notice to N V and Sons that threatened to impose damages under the subcontract for delay. N V and Sons submitted responses to the e-mails and 24-hour notice, disputing its responsibility for delay. R K Sanders did not establish that N V and Sons was solely or primarily responsible for delays on the project. R K Sanders submitted time sheets and receipts for expenses it alleged to have incurred for augmenting N V and Sons’ workforce and performing warranty work. R K Sanders admitted that it hired some of N V and Sons’ employees, including Mr. Dominguez, to perform this work. Mr. Dominguez testified that the work he performed for R K Sanders was for “extras” that were not within the scope of N V and Sons’ subcontract. Mr. Nicovic and Mr. Dominguez both credibly testified that N V and Sons fully performed the interior wall framing and drywall, including tape and texture, the structural framing, and the interior hardlids, except for the acoustical plaster ceiling in the lobby. Mr. Nicovic credibly testified that N V and Sons requested a sample of the acoustical plaster for the lobby ceiling, but that the architect failed to provide a sample. Mr. Vulaj testified that N V and Sons was willing to credit $2,200.00 to R K Sanders for the acoustical plaster ceiling in the lobby. Mr. Vulaj did not explain his estimation of the value of the ceiling or describe the hardlids that N V and Sons completed. N V and Sons submitted 12 change orders to R K Sanders. On June 26, 2010, R K Sanders approved two change orders for interior framing in the amounts of $198.00 and $522.00. R K Sanders did not approve the other change orders. No other evidence was submitted on the change orders that R K Sanders did not approve. R K Sanders argued that N V and Sons abandoned the contract, forcing R K Sanders to hire Division Nine Contracting to perform the painting in N V and Sons’ subcontract, for a total price of $18,000.00. Mr. Orduno testified that he and three other painters employed by N V and Sons went to the project in mid-June 2010, but that R K Sanders’ job superintendent, Tim House, instructed them to leave the project because R K Sanders had hired another subcontractor to paint the project. By July 13, 2010, R K Sanders had billed MCCCD a total of $29,500.00 for 78% completion of the line item for drywall and framing. MCCCD paid this billing to R K Sanders. By August 2, 2010, R K Sanders had billed MCCCD a total of $37,652.00 for 100% completion of the line item for drywall and framing. MCCCD paid this billing to R K Sanders. R K Sanders made one payment to N V and Sons on May 27, 2010, in the amount of $7,030.56. On that same date, R K Sanders issued a joint check to N V and Sons and its material supplier, Contractors Wholesale, in the amount of $10,969.44. Contractors Wholesale sued R K Sanders and N V and Sons for the cost of materials that were used in the project. R K Sanders submitted a copy of its check for $12,000.00 to Contractors Wholesale. Mr. Sanders testified that the check was for payment to resolve the litigation. Mr. Vulaj testified that he talked to Tim Demore at Contractors Wholesale on the day before the hearing, and that Mr. Demore told him that it had not been paid. R K Sanders’ contract with MCCCD required the project to be complete on August 31, 2010, but the actual completion date was January 7, 2011. Mr. Sanders testified that R K Sanders faced potential liability to MCCCD on the project for $107,000.00 in liquidated damages for delay. Mr. Sanders testified that R K Sanders negotiated the liquidated damages down to $40,000.00, and that as of the date of the hearing, MCCCD still owed R K Sanders $231,000.00 for the project. According to the Registrar’s record, both parties’ licenses are current and in good standing. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] The parties bear the burden of proof to establish their opponents’ statutory violations by a preponderance of the evidence.[3] The parties also bear the burden to establish affirmative defenses to their opponents’ cases 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 preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[6] R K Sanders did not establish that N V and Sons abandoned the project in violation of A.R.S. § 32-1154(A)(1) by failing to complete the acoustical ceiling in the lobby and painting at the project, due to the numerous delays caused by others. The evidence established that the project was a difficult one with numerous conflicts and failures to communicate among the general contractor, R K Sanders, the owner, MCCCD, the architect, and various subcontractors, including N V and Sons. R K Sanders did not establish that N V and Sons was more responsible for the delays on the project than R K Sanders, MCCCD, the architect, or the other subcontractors. N V and Sons established that R K Sanders violated A.R.S. § 32-1154(A)(11) by failing to pay N V and Sons more than seven hundred fifty dollars when due for its partial performance of the parties’ subcontract. R K Sanders established that it paid N V and Sons or its supplier, Contractors Wholesale, a total of $29,999.56 for services and materials on the project. R K Sanders did not establish that it is entitled to any offsets for any monies paid to its employees or other subcontractors for N V and Sons’ work. N V and Sons acknowledged that it did not complete the interior painting on the project. The cost of this item on the proposal was $8,650.00. Although N V and Sons claimed to have completed some of the hardlids, it admitted that it did not complete the 1” plaster ceiling in the lobby on the project. N V and Sons did not establish the value of the hardlids that it completed or establish why the value of the 1” plaster ceiling was only $2,200.00 of the $9,558.00 cost of hardlids on the proposal, even though it was the only one specifically mentioned. Therefore, N V and Sons established that R K Sanders failed to pay $11,372.44[7] that it owes for N V and Sons’ work on the project. RECOMMENDED ORDER Case No. 2010-30845971 Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order in Case No. 2010-30845971, R K Sanders’ complaint against N V and Sons’ License No. ROC234782 be dismissed. Case No. 2010-[number redacted] Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order in Case No. 2010-[number redacted], R K Sanders’ License No. ROC242682, Class B-1 be suspended until it has paid $11,372.44 to N V and Sons. It is further recommended that if prior to the effective date of the Registrar’s final order, the Registrar receives satisfactory proof in writing from R K Sanders that it has paid N V and Sons $11,372.44 by certified or cashier’s check, the Registrar not suspend R K Sanders’ license but, instead, close Case No. 2010-[number redacted]. 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, June 27, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The record in this matter does not explain why the parties’ subcontract for the work was $3,000.00 more than the amount of N V and Sons’ proposal. [2] See 32-1101 et seq. [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] Black’s Law Dictionary at page 1220 (8th ed. 1999). [7] This amount was calculated as follows: $58,860.00 (subcontract amount) - $9,558.00 (proposal amount for hardlids) - $8,650.00 (proposal amount for interior painting) + $720.00 (approved change orders) - $29,999.56 (payments to N V and Sons or Contractors Wholesale for project) = $11,372.44

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