ALJDEC decisions subject to certification as final

2010A-741696-ROC · Registrar of Contractors · 2010-08-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 26, 2010 at 8:15 a.m. APPEARANCES: Complainant Mazatzal Drywall, L.L.C. appeared through Larry Hopson, its managing member and qualifying party; Respondent Intermountain West Civil Construction, Inc. appeared through Arthur E. Lloyd, Esq., Lloyd & Robinson, P.L.L.C. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On March 8, 2004, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC193308, Class K-10 for dual drywall to Complainant Mazatzal Dry Wall, L.L.C. On March 22, 2004, the Registrar issued License No. ROC194358, Class KB-1 for dual building contracting to Respondent Intermountain West Civil Constructors, Inc. On October 16, 2009, the Registrar received a complaint from Complainant against Respondent’s license. The complaint alleged that Respondent had failed to pay Complainant $5,024.00 for work that Complainant performed under a subcontract at Lot 4, Chaparral Pines in Payson, Arizona, after Respondent’s superintendent wrongfully ordered Complainant off the job. On December 9, 2009, Complainant requested that the Registrar issue a citation against Respondent’s license. On February 3, 2010, the Registrar issued a Citation and Complaint against Respondent’s license, charging violations of A.R.S. § 32-1154(A)(11) and (13) (namely A.R.S. § 32-1124(B)). On February 9, 2010, Respondent’s qualifying party and president, Kyle Reese Randall, filed a written answer to the Citation and Complaint, denying any statutory violation. Mr. Randall affirmatively alleged that Complainant walked off the job, overcharged Respondent for the work, and failed to pay its materials supplier, which had filed a lien against the property. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, to schedule and to conduct a fair hearing. After one continuance at Respondent’s request, a hearing was held on July 26, 2010. Complainant presented the testimony of three witnesses: (1) Larry Hopson, Complainant’s qualifying party and managing member; (2) Justin Schulz, Complainant’s superintendent on the job; and (3) Jennifer Hopson, Complainant’s office manager, who writes all of its proposals and contracts. Complainant submitted seven exhibits. Respondent presented the testimony of three witnesses: (1) Mariah Lantz, Respondent’s superintendent on the job; (2) Mr. Randall, Respondent’s president; and (3) Bill Bolton, qualifying party for Bolton’s Custom Drywall, Inc., License No. ROC098258, Class C-10 for residential drywall, whom Respondent hired to complete the job. Respondent submitted eight exhibits. Hearing Evidence In late 2008, Respondent solicited bids from subcontractors to prepare its own bid to act as general contractor for construction of a large custom home for an individual named Dr. Zamorano in the Chaparral Pines subdivision in Payson (“the Zamorano residence”). On December 1, 2008, Complainant submitted a proposal to Respondent to “[h]ang approximately 9800 S/F of drywall” at the Zamorano residence for a contract price of $10,000.00. The scope of work excluded tongue and groove, which would be installed by others on all vaulted ceilings, and all exterior surfaces. Complainant’s December 1, 2008 proposal required three equal payments that would be due as follows: (1) Upon the delivery of materials to the jobsite; (2) Upon the job passing the nail inspection; and (3) Upon job completion. Complainant’s December 1, 2008 proposal provided that it was valid for thirty days and that if work did not begin in thirty days, the price could increase due to higher material costs. Subsequently, Respondent altered the scope of work for the Zamorano residence to add installation of drywall on the vaulted ceilings and installation of exterior board under a covered entry and back deck. On February 11, 2009, Complainant submitted a second proposal to Respondent to “[h]ang approximately 12800 S/F of drywall” at the Zamorano residence for a contract price of $13,500.00. The scope of work included installation of drywall throughout the interior of the house, including on vaulted ceilings, and installation of exterior board under the covered entryway and back deck. The payment terms in Complainant’s February 11, 2009 proposal were the same as in its December 1, 2008 proposal. No representative of Respondent ever signed either proposal. Mr. Randall testified that he had “nothing to do with” hiring Complainant and that Respondent’s former superintendent, Chris Perks, hired Complainant. Mr. Perks did not testify at the hearing. Mr. Randall testified that he understood that Complainant’s December 1, 2008 proposal was based on a price of approximately $1.02/square foot of drywall. Mr. Randall testified that the additional vaulted ceilings and exterior areas under the covered entryway and patio only added approximately 800 square feet. Mr. Randall testified that Respondent never agreed to a $3,500.00 change order for the additional 800 square feet and, instead, asked Complainant to justify the additional charge. Mr. Hopson testified that the prices on Complainant’s proposals to install drywall are based on many variables, including the height of the area, location of the drywall, and the texture of the finish, not just square footage. Mr. Hopson testified that the additional cost of the February 11, 2009 proposal was due to increased material prices and to location of the additional drywall area on vaulted and exterior ceilings. Mr. Hopson testified that his wife writes Complainant’s proposals and contracts. She includes square footage to make proposals “pleasing to the eye,” not as the sole basis for the price. On April 27, 2009, Complainant delivered materials to the Zamorano residence and on April 28, 2009, its crew started hanging drywall. On April 27, 2009, Complainant submitted an invoice to Respondent in the amount of $4,500.00 pursuant to the February 11, 2009 proposal. When Complainant started hanging drywall at the Zamorano residence, Respondent’s superintendent on the project was Mr. Perks. Mr. Hopson testified that he and Mr. Perks made a “verbal agreement” that Complainant would complete the drywall in 30 days, “give or take.” Mr. Hopson testified that after Respondent started the job at the Zamorano residence, Mr. Perks said that the job was over budget and showed Mr. Hopson two bids for drywall from other subcontractors. Mr. Hopson testified that Mr. Perks said that Mr. Randall wanted Complainant to reduce its price $3,000.00. Mr. Hopson testified that when he told Mr. Perks that Complainant could pull off the job, but that it would not reduce its price, Mr. Perks “crumpled up the bids and threw them on the roof.” On or about May 1, 2009, Mr. Perks quit working for Respondent and moved to Alaska. Ms. Lantz became Respondent’s superintendent for construction of the Zamorano residence. Mr. Schulz testified that after Ms. Lantz became Respondent’s supervisor on the Zamorano residence, she complained to subcontractors about the job being $60,000.00 over budget. On May 5, 2009, Complainant’s work at the Zamorano residence passed the nail inspection. On May 5, 2009, Complainant submitted an invoice to Respondent for an additional $4,500.00 pursuant to the February 11, 2009 proposal. On May 8, 2009, Respondent issued two checks to Complainant for the two invoices, both in the amount of $4,500.00, for a total of $9,000.00. On May 8, 2009, Mrs. Hopson, on behalf of Complainant, signed an Unconditional Waiver and Release on Progress Payment for the first $4,500.00 payment, in which she warranted that Complainant would use the progress payment to pay its suppliers who had furnished materials for the job. Complainant did not use the first draw to pay Sun Valley Supply, which had supplied the materials that Complainant used at the Zamorano residence. Ms. Lantz testified that Respondent’s agreement with Dr. Zamorano required it to obtain a Certificate of Occupancy before July 1, 2009. She testified that when she became superintendent on the job, she became concerned about Complainant’s slow progress in hanging drywall. Ms. Lantz testified that Sun Valley Supply told her that Complainant had not paid for the supplies for the Zamorano residence. Ms. Lantz did not say anything to Mr. Hopson or Mr. Shulz about Sun Valley Supply’s alleged communication. Mrs. Hopson testified that Complainant usually uses the last draw on a job to pay the material supplier “to get leverage.” Ms. Lantz testified that on May 20, 2009, on behalf of Respondent, she ordered Complainant’s crew to leave the Zamorano residence. On May 21, 2009, Complainant sent Respondent an invoice for the final $4,500.00 under the February 11, 2009 proposal for the Zamorano residence. The invoice stated that Respondent had wrongfully terminated the contract because the contract did not contain a completion date. On June 13, 2009, Complainant sent Respondent an invoice for $5,024.00, which included the final $4,500.00 payment, plus $524.00 for interest. Mr. Hopson and Mr. Schulz testified that Complainant completed approximately 80% of the work described in the February 11, 2009 proposal. Respondent hired Bolton’s Custom Drywall, Inc. to complete the drywall at the Zamorano residence under a time and materials contract. At the time, Bolton’s Custom Drywall, Inc. had been working for Respondent on a large commercial project nearby.[1] A three-man crew from Bolton’s Custom Drywall, Inc. spent approximately six working days to complete the drywall, at a cost of $5,645.00. Mr. Bolton and Ms. Lantz testified that Complainant completed approximately 60% of the work described on the February 11, 2009 proposal. Sun Valley Supply eventually filed a lien against the Zamorano residence for the supplies. On March 30, 2010, Complainant paid Sun Valley Supply $2,600.00 and it released the lien. According to the Registrar’s records, Respondent’s license is current and in good standing. This is the only complaint pending against the license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] Complainant bears the burden of proof and must establish cause for the Registrar to discipline Respondent’s license by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses 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] Complainant did not submit any documents that Respondent used in its contracting business that did not include Respondent’s license number, preceded by the acronym “ROC.” Therefore, Complainant did not establish that Respondent violated A.R.S. § 32-1154(A)(13).[7] Mr. Reese admitted at the hearing that he was not involved in the formation of the parties’ contract for the Zamorano residence. Mr. Reese’s testimony that the basis of Respondent’s contract with Complainant for drywall installation was a cost per square foot was not credible. Therefore, Complainant established that Respondent accepted the February 11, 2009 proposal to install drywall at the Zamorano residence by instructing Complainant to begin the job and by making to first two $4,500.00 payments that the proposal required. Complainant’s February 11, 2009 proposal sets forth the terms of the parties’ contract, including the price. Less than 30 days had passed between the time when Sun Valley Supply supplied materials to the Zamorano residence and when Respondent asked Complainant to leave the job. Ms. Lantz’ testimony that Sun Valley Supply complained to her about Complainant’s failure to pay for supplies was not credible, especially since she did not convey the complaint to Complainant. Complainant’s failure to pay Sun Valley Supply did not play any part in Respondent’s decision to terminate Complainant from the job.[8] Respondent did not establish at the hearing that Complainant’s delay or poor work in performing the contract justified Respondent’s termination of the parties’ agreement on May 20, 2009. Instead, Complainant established that Respondent terminated Complainant’s performance because it would not reduce the price to which Mr. Perks, on behalf of Respondent, had agreed. Respondent’s payment of two-thirds of the contract price by May 8, 2009 undermines Ms. Lantz’ and Mr. Bolton’s testimony that, on May 20, 2009, Complainant had completed only 60% of the project. Mr. Hopson and Mr. Schulz credibly testified that on May 20, 2009, Complainant had completed 80% of the drywall at the Zamorano residence. Therefore, Complainant has established that Respondent violated A.R.S. § 32- 1154(A)(11)[9] by failing to pay Complainant $1,800.00.[10] The full amount of the $4,500.00 final draw would have been due if Respondent had allowed Complainant to complete the job. Even though Respondent breached the contract by ordering Complainant to leave the jobsite, A.R.S. § 32-1154(A)(11) does not require a general contractor to pay a subcontractor for services that were not actually rendered. With respect to Complainant’s claim for interest, the legislature has not authorized the Registrar to award interest in an administrative proceeding against a contractor’s license.[11] RECOMMENDED ORDER Based on the contracting law violation that Complainant Mazatzal Dry Wall, L.L.C. established in this matter, the undersigned Administrative Law Judge recommends that, on the effective date of the Registrar’s final order in this matter, the Registrar suspend Respondent Intermountain West Civil Constructors, Inc.’s License No. ROC194358, Class KB-1 until Respondent provides proof to the Registrar that it has paid Complainant the sum of $1,800.00. It is further recommended that if on or before the effective date of the order, Respondent provides to the Registrar satisfactory documentary proof that it has paid Complainant $1,800.00, the Registrar not suspend Respondent’s license but, instead, close Case No. 2010-741696. 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, August 12, 2010.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Registrar also has issued License No. ROC098259, Class L-10 for commercial drywall to Bolton’s Custom Drywall, Inc. [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 statutory subsection 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.” The specific statute charged was A.R.S. § 32-1124(B), which 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.” [8] This decision does not condone Complainant’s practice of delaying payments to suppliers until it receives the final draw on a job. When Mrs. Hopson signed the lien release, indicating that Complainant had paid its suppliers, she misled Respondent. If Sun Valley Supply had filed its own complaint to the Registrar against Complainant under A.R.S. § 32- 1154(A)(11), Respondent’s failure to pay the final draw would not constitute a defense. Nonetheless, although Complainant was not blameless in some aspects of its transaction with Respondent, Complainant’s witnesses’ testimony on the circumstances of the termination was more credible than Respondent’s witnesses’ testimony. [9] 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 . . . .” [10] The amount that Respondent owes was calculated by taking 80% of the total contract price of $13,500.00, or $10,800.00, and deducting Respondent’s payments of $9,000.00. [11] Cf. A.R.S. § 12-347 (entitling court clerk to include in judgment costs and “interest on the verdict from the time it was rendered”).

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