ALJDEC decisions subject to certification as final

2011A-5258-ROC · Registrar of Contractors · 2012-09-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: August 17, 2012 APPEARANCES: Steve Lambert appeared personally. Cratus Development, L.L.C. was represented by its attorney, Guy W. Bluff, Esq., of Bluff & Associates, P.C. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order: FINDINGS OF FACT 1. Cratus Development, L.L.C. (“Respondent”) is the holder of License No. KB-2.256863-D issued by the Registrar of Contractors (“Registrar”). 2. On September 15, 2011, Steve Lambert (“Complainant”) filed a written Complaint with the Registrar alleging statutory violations by Respondent. The Registrar designated Complainant’s Complaint as Case No. 2011-5258. 3. Complainant’s Complaint alleged the following: (i) unjust enrichment; (ii) breach of contract; (iii) misappropriation of funds; (iv) the doing of a fraudulent act by the licensee; (v) abandonment of the contract; (vi) failure by a licensee, agent, or official to pay monies in excess of $750.00 when due for materials; and (vii) false, misleading, and deceptive action. 4. The Registrar issued a Citation and Complaint in Case No. 2011-5258 charging Respondent with violating the following provisions: A.R.S. § 32-1154(A)(2); A..R.S. § 32-1154(A)(7); A.R.S. § 32-1154(A)(11); and A.R.S. § 32-1154(A)(20). 5. On January 13, 2012, the Registrar issued a default Decision and Order in Case No. 2011-5258 due to Respondent’s failure to timely file an Answer to the Citation and Complaint. 6. On January 24, 2012, Respondent filed a Motion for Reconsideration and Request for Relief with the Registrar, which the Registrar treated as a Petition for Rehearing. On or about March 12, 2012, Complainant filed a written response in objection to Respondent’s motion. 7. On June 19, 2012, the Registrar issued an Order Granting Petition for Rehearing and Order Amending Citation and Complaint. The Registrar ordered the removal of the alleged violation of A.R.S. § 32-1154(A)(2) from the Citation and Complaint. 8. The Registrar forwarded Case No. 2011-5258 to the Office of Administrative Hearing, an independent agency, for an evidentiary rehearing. 9. Complainant and Respondent’s member, Eddie Valenzuela, were originally roommates at a residence located at 1480 E. Sunrise Way, Gilbert, Arizona. 10. On November 17, 2008, Complainant was named as a member of Respondent. Complainant served as Respondent’s project manager working out in the field. Mr. Valenzuela worked at obtaining jobs for Respondent. Both individuals were named signers for Respondent’s bank account. However, Complainant conducted the majority of the bank transactions relating to Respondent’s bank account. 11. On March 6, 2009, Complainant was removed as a member of Respondent at his request due to his divorce from Colleen Lambert. Complainant remained employed as Respondent’s project manager. Complainant was compensated at the rate of $500.00 per week, plus expenses, when Respondent had work for Complainant. Complainant continued to physically possess Respondent’s checkbook and wrote checks from Respondent’s account. Complainant had a company debit card, a Jiffy Lube fleet card, and a Shell fleet card. 12. Complainant’s Complaint claims that the parties had a verbal and written contract dated November 14, 2008, for a worksite located at 1004 E. Sunrise Way, Gilbert, Arizona. The scope of work was listed by Complainant in the Complaint as “Project manager/partnership.” Complainant contends that the contract price owed to Complainant is $41,903.76. The Complaint stated that the completion date and date work last performed occurred on July 12, 2012. Complainant’s Complaint further stated that the subject project had a building permit, and plans and specifications. 13. At the rehearing, Complainant failed to present any written contract between the parties concerning Complainant’s claim for $41,903.76. Complainant failed to establish that there was a project at the subject location identified in his Complaint. On the contrary, there is credible evidence that the stated project location is a fictitious address that does not exist. 14. The evidence of record does not support Complainant’s claim that Respondent hired Complainant for the subject project listed in the Complaint for the price of $41,903.76. Complainant lacks any credibility on this claim. Notwithstanding the information contained in his Complaint, Complainant testified that Respondent promised to pay him $40,000.00 for his services as a project manager for a project in Sierra Vista. 15. The weight of credible evidence established that Complainant received compensation for work performed on behalf of Respondent at the rate of $500.00 per week when working for Respondent. 16. Complainant failed to present any credible evidence supporting his allegation that Respondent was unjustly enriched. 17. Complainant failed to present any credible evidence supporting his allegation that Respondent breached any contract with Complainant. 18. Complainant failed to present any credible evidence supporting his allegation that Respondent misappropriated funds. On the contrary, there is credible evidence that Complainant misappropriated Respondent’s funds on numerous occasions. Complainant paid rent on his residence, he made child support payments, and wrote checks to his girlfriends from Respondent’s bank account that he had access to for business purposes. Complainant regularly used Respondent’s business debit card issued to him for his own personal use. For example, Complainant would make purchases with the debit card and get cash back that he then used for personal use. The evidence of record established that Complainant, rather than Respondent, misappropriated funds from Respondent’s bank account. 19. Complainant failed to present any credible evidence that Respondent committed fraud, as alleged in his Complaint. Complainant did not establish the nine elements of common-law fraud. 20. Complainant failed to present any credible evidence that Respondent abandoned any contract as alleged in his Complaint. The Registrar did not charge Respondent with violating the provisions of A.R.S. § 32- 1154(A)(1) by abandoning any project. 21. Complainant failed to present credible evidence that Respondent failed to pay him in excess of $750.00 for materials, as alleged in Complainant’s Complaint. The evidence of record clearly established that Complainant had access to Respondent’s bank account and that he regularly reimbursed himself for expenses. Respondent contends that if Complainant was owed any money, he would have had the ability to reimburse himself as he historically had done. 22. Complainant failed to present any credible evidence that Respondent committed any false, misleading, and deceptive actions as alleged in the Complaint. On the contrary, the evidence of record supports a finding that it is Complainant who has committed false, misleading, and deceptive actions in this matter. For example, Complainant’s financial statement filed in his divorce action contains false, misleading, and deceptive disclosures by Complainant. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over Respondent and the subject matter in this case. 2. Pursuant to A.A.C. R2-19-119(B), Complainant has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. A.A.C. R2-19-119(A). 3. A.R.S. § 32-1154(A)(7) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[t]he doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured.” A.R.S. § 32-1154(A)(7) does not define what constitutes actionable fraud. The nine elements of common-law fraud are as follows: “‘(1) A representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity, (7) his reliance on its truth; (8) his right to rely thereon; (9) his consequent and proximate injury.’”[1]

4. Complainant failed to present credible evidence to support the charged violation that Respondent violated the provisions of A.R.S. § 32-1154(A)(7). Complainant failed to sustain his burden of proving the nine elements of common-law fraud in this matter. 5. Complainant failed to present credible evidence to support the charged violation that Respondent violated the provisions of A.R.S. § 32-1154(A)(11). Complainant failed to sustain his burden of proving that Respondent owes him a sum in excess of $750.00. On the contrary, the evidence of record is replete with incidences of Complainant diverting funds from Respondent’s bank account for his personal use and indebtedness. 6. Complainant failed to present credible evidence to support the charged violation that Respondent violated the provisions of A.R.S. § 32-1154(A)(20). Complainant failed to sustain his burden of proving that Respondent committed any act or omission which if known to the Registrar would have been the basis for the denial of the renewal of Respondent’s contracting license by the Registrar. 7. The evidence of record supports the dismissal of the Citation and Complaint in Case No. 2011-5258. RECOMMENDED ORDER The Citation and Complaint in Case No. 2011-5258 shall be dismissed on the effective date of the Order entered in this matter. 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, September 5, 2012.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Staheli v. Kauffman, 122 Ariz. 380, 383, 595 P.2d 172, 175 (1979) (quoting Carrel v. Lux, 101 Ariz. 430, 434, 420 P.2d 564, 568 (1966); Nielson v. Flashberg, 101 Ariz. 335, 338-39, 419 P.2d 514, 517-18 (1966) (footnote added)).

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