ALJDEC decisions subject to certification as final

2010A-308477777-ROC · Registrar of Contractors · 2011-07-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 13, 2011

APPEARANCES: Complainant was represented by attorney Jeff Boshes, Jennings, Strouss & Salmon, PLC, accompanied by General Manager Scott Cooper; Respondent was represented by attorney Roger Decker, Udall, Shumway & Lyons, PC, accompanied by the company’s Managing Member and Qualifying Party Ryan Mechem.

WITNESSES: Greg Yost, Consultant/Representative for Complainant Scott Cooper Darren Dixon, Financial Controller for Complainant Ryan Mechem Fermin P. Camacho, Member of Camwest LLC Jason Jarvis, Respondent’s Director of Business Operations

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant brings this action alleging that Respondent engaged in fraud and failed to pay material suppliers on a parking lot project it did for Complainant at the “Wet N’ Wild Water Park” in Phoenix, Arizona. Respondent denies that it has ever owed money to those material suppliers. This tribunal entered the complaint file received from the Registrar of Contractors into the record, along with marked Exhibits A through W, submitted by Complainant, and Exhibits 1 through 22 (excluding 19 and 20) submitted by Respondent. The parties presented evidence and testimony at the hearing. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding no violation. FINDINGS OF FACT 1. Respondent is the holder of a license KA.239909-D, a general dual engineering contractor’s license issued by the Registrar of Contractors (“ROC”). It authorizes Respondent to perform construction in connection with streets, roads, bridges and other fixed works. Ryan Mechem is Respondent’s Qualifying Party and sole member of the limited liability company. 2. The record shows that as of July 1, 2009, Respondent had a “Master Agreement for Off-Site Construction” with subcontractor Camwest Paving & Construction, LLC (“Camwest”), another licensed contractor.[1] This Master Agreement was for the purpose of Respondent hiring Camwest as subcontractor on projects Respondent obtained.[2] The members of Camwest are Fermin Camacho, Rob West, and Ryan Mechem.[3] 3. In December 2009, Complainant hired Respondent to perform parking lot improvements at the water park noted above. The record contains two forms of the contract between the parties. Exhibit E is a contract for the project between Complainant and Respondent dated December 10, 2009. It is signed for Complainant by Greg Yost, Complainant’s representative, and for Respondent by Rob West as “Vice President.” The signatures were witnessed by Jay Fellows, an employee of Complainant. All persons signed the contract on December 10, 2009. Each page of Exhibit E contains the initials of Rob West and Greg Yost. 4. Greg Yost testified that he was present when Exhibit E was signed by West and Fellows. They signed it at Complainant’s offices at the water park. 5. Exhibit 1 is a copy of the same contract with different signatures.[4] Exhibit 1 is identical to Exhibit E except that it shows that Jason Jarvis as “Director” signed the contract for Respondent on December 11, 2009 and that Ryan Mechem signed it as witness on December 11, 2009. Furthermore, Jason Jarvis initialed each page rather than Rob West. The only other difference is that Exhibit 1 shows a fax line that reveals the contract was faxed from Greg Yost to Respondent on December 10, 2009, at 4:48 p.m. 6. Jason Jarvis, Respondent’s Director of Business Operations, testified that he and Mechem signed Exhibit 1 on December 11, 2009, after it had been faxed to Respondent’s office. He testified that the faxed copy had only the initials and signature of Greg Yost on it; the two other signature lines were blank.[5] 7. Neither Exhibit E nor Exhibit 1 are original documents. 8. The record shows that Camwest had worked on an earlier phase of the parking lot but could not meet the bonding requirement to make a bid on the next phase in December 2009. Respondent could meet the bonding requirement. 9. The Master Agreement[6] between Respondent and Camwest contains an attachment designated “Contract Number 1” and “(‘WET N’ WILD – PHOENIX’) CONSTRUCTION CONTRACT FOR OFF-SITE CONSTRUCTION.”[7] That document (hereinafter “subcontract”) shows the subcontractor for the water park parking lot project to be Camwest. The subcontract contains an odd date for the signatures on it. The body of the contract refers to the scope of work as being per a bid dated November 20, 2009. That date is typed into the contract. The line introducing the execution portion of the subcontract, also typed, states that the date of execution is December 4, 2009. However, the signatures of Jason Jarvis, Rob West, and Fermin Camacho are dated, in handwriting, as September 11, 2009. 10. Neither party provided a credible explanation for the odd date of the signatures in the subcontract but both parties accepted the premise that Camwest was a subcontractor of Respondent. Complainant implied that the subcontract had been altered, but provided no explanations for who altered it or why it would have been altered. 11. The work on the parking lot was performed by Camwest. Progress payments were made initially to Respondent from January 2010 to April 2010. In June 2010, Complainant began making payments to Camwest directly, at the urging of Rob West. Both Greg Yost and Scott Cooper testified that Rob West had represented himself as an agent for Respondent, so they were not suspicious of the requested change in payment procedures. Complainant made three payments directly to Camwest, totaling more than half of the contract price. 12. Shortly after completion of the project, four material suppliers filed liens on the property because they had not been paid by Camwest for materials used on the project.[8] Respondent does not dispute these liens. All liens show that the materials were supplied to Camwest and not Respondent. 13. Complainant paid the suppliers to have the liens released.[9] 14. Complainant submitted Exhibits U and V, each a Decision and Order issued by the ROC against Camwest in each of two cases, one filed by Complainant and the other filed by one of the four material suppliers noted above. Because each Decision and Order was made after default by Camwest, there are no specific factual findings. However, based on the testimony at the hearing and Exhibit T, it is evident that those default orders found Camwest to have violated the no-pay provision of the ROC statutes. Therefore, by default in those cases, the amounts at issue in this matter were found to be due from Camwest in those matters. Exhibit T, the complaint filed by Complainant against Camwest, shows that the claim included a no-pay complaint alleging that the four material suppliers noted above were due money from Camwest. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[10] Further, the standard of proof at hearing is by preponderance of the evidence.[11] Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[12] Complainant has not met that burden. 2. The Citation and Complaint in this case cites the “no-pay” provision found in Arizona Revised Statutes (A.R.S.) § 32-1154(A)(11) that prohibits the failure of a licensee to pay monies in excess of $750 “when due for materials or services” when the licensee has the capacity to pay or when the licensee has been paid for the project. It also cites subsection (A)(7), which prohibits the performance of a fraudulent act that substantially harms another. 3. Complainant’s case centers on whether or not Rob West was an agent of Respondent. Although he apparently represented himself as such, there is no other evidence in the record showing corroboration or ratification of that representation by Respondent. Neither is there any evidence that would show some sort of apparent authority given to Rob West by Respondent. Rob West’s authority to sign the contract on behalf of Respondent is not supported by any documentation submitted by Complainant, nor was his authority to change the payment provisions to direct payment to Camwest. Therefore, Complainant has failed to show that Rob West was an agent of Respondent. 4. The evidence is not sufficient to show that any amount is due from Respondent to the material suppliers. 5. At best, the evidence shows only a good faith dispute between the parties that does not warrant finding a violation of the no-pay provision. This tribunal cannot find that the amount claimed by Complainant is due from Respondent. The Registrar of Contractors, acting through an administrative disciplinary hearing, is not empowered by law to adjudicate amounts alleged to be due and owing in the face of a good faith dispute on such amounts. Until and unless any claimed obligation is reduced to judgment by a civil court of competent jurisdiction, no violation by Respondent of the no-pay provision can be supported. 6. Neither does the evidence show a fraudulent act by Respondent. In Complainant’s closing argument, Complainant admitted that the claimed fraudulent act was by Rob West. Because it has not been shown that Rob West was an agent of Respondent, this tribunal will not address whether there has been a fraudulent act. If there has been, it was not by Respondent. 7. This matter should be dismissed. RECOMMENDED ORDER Based on the foregoing, it is hereby recommended that Citation and Complaint 2010-[number redacted] against Rhino Contracting LLC be dismissed.

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, July 5, 2011.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibits H and 2. [2] Camwest’s license (252472), now revoked, was a K-2 license for excavating, grading, and oil surfacing. [3] Exhibit B. Fermin Camacho testified that Ryan Mechem only contributed capital and was not involved in the operations of Camwest. [4] Exhibits G is a duplicate copy of Exhibit 1. [5] One explanation for the differences between the two forms of contract are that Greg Yost initialed and signed the contract first at one location and it was then faxed to Respondent’s offices where Jarvis and Mechem signed the faxed copy. Meanwhile, the original was signed by West and Fellows at the other location. [6] Exhibit 2. [7] Exhibit 3. [8] Exhibits O, P, Q, and R. [9] Exhibit W. [10] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [11] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [12] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996).

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