ALJDEC decisions subject to certification as final

2011A-909-ROC · Registrar of Contractors · 2011-09-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 30, 2011, at 8:00 a.m. APPEARANCES: Complainant Darrel McCoy appeared through James Sparks, Esq., Britt Law Group, P.C.; Respondent T K Brooks Contracting, Inc. dba T M B Contracting appeared through Michael Thal, Esq., Lang Baker & Klain, P.L.C. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In July 2002, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC176589, Class KB-2 for dual residential and small commercial contracting to T K Brooks Contracting, Inc. doing business as (“dba”) T M B Contracting (“Respondent”). In November 2009, the Registrar issued License No. ROC260654, Class K-9 for dual concrete to Greenology, L.L.C. (“Greenology”). Darrel McCoy (“Complainant”) is Greenology’s qualifying party, managing member, and the only person listed on its license. On February 14, 2011, the Registrar received a complaint from Complainant against Respondent that alleged that Respondent owed Complainant a total of $10,188.00 for five projects on which Complainant had performed work or furnished materials, as follows: (1) A residential remodel for homeowners Westra (“the Westra job”) for $2,000.00; (2) A residential remodel at 4980 West Libby Lane (“the Libby Lane job”) for $3,400.00; (3) A residential remodel for homeowners Witt (“the Witt job”) for $2,538.00; (4) A commercial tenant improvement for American Traffic (“the American Traffic job”) for $1,800.00; and (5) A commercial tenant improvement for the S O S Building (“the S O S Creekside job”) for $1,800.00.[2] The complaint did not mention Greenology and Complainant’s invoice to Respondent was in his own name. On the same date that Complainant filed his complaint against Respondent, February 14, 2011, he voluntarily cancelled Greenology’s License No. ROC260654. The Registrar furnished a copy of Complainant’s complaint to Respondent for its immediate attention. On or about February 28, 2011, the Registrar received Complainant’s request that the Registrar issue a citation against Respondent because it had not paid him anything. On or about March 2, 2011, the Registrar received Respondent’s attorney’s response to the complaint, informing the Registrar that because Complainant was Greenology’s qualifying party when the work allegedly was performed, Greenology should have been the named complainant. Respondent’s attorney stated: [Respondent] disputes that it owes any money to Greenology. I simply don’t know how to comment on [Complainant] giving up his license and then claiming that he should be paid money in his individual and unlicensed capacity. Perhaps, [Complainant] can give us answers to this issue at a later date.

On June 20, 2011, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(11) and (14). As noted in the margin, the Citation and Complaint named Greenology as the party Complainant. Respondent timely answered the Citation and Complaint, denying any statutory violation or that it had entered into any contracts with Greenology or Complainant, and affirmatively alleging that if Complainant had worked for Respondent in his individual capacity, Complainant “is guilty of contracting without a license . . . .” The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on August 30, 2011. Complainant submitted 17 exhibits and testified on his own behalf. Respondent submitted 10 exhibits and presented the testimony of two witnesses: (1) Thad Brooks, Respondent’s qualifying party and officer; and (2) Javier Muñoz Ruiz, Complainant’s former partner in Greenology’s business. According to the Registrar’s electronic record, Respondent’s license is current and in good standing. There is only one complaint pending against the license. Hearing Evidence Complainant’s Partnership with Mr. Ruiz On January 11, 2010, Complainant entered into a partnership with Mr. Ruiz for the conduct of Greenology’s business. Mr. Ruiz was added as a member on the Arizona Corporation Commission’s record for Greenology, but was not added to the Registrar’s record. Complainant through Greenology had a business relationship with S O S Restoration, L.L.L.P., License No. ROC188127, Class KB-1 (“S O S”). Before July 2010, S O S had subcontracted to Greenology numerous residential and commercial jobs throughout the State of Arizona. In July 2010, Complainant and Mr. Ruiz had a falling out.[3] Complainant did not want to contract for any more jobs under Greenology’s license because he would have to share profits from the jobs with Mr. Ruiz. Mr. Brooks testified that Complainant’s son, Dan McCoy (“Mr. McCoy”), introduced him to Jerry Booth, S O S superintendent for residential projects, while Mr. McCoy and Ruben Fabien, a laborer, were working for Greenology building a fireplace on the Westra job. Mr. Brooks testified that because Greenology was “falling apart” in its performance of jobs for S O S due to the dispute between Complainant and Mr. Ruiz, Complainant suggested that he refer all S O S jobs to Respondent. In exchange for the job referrals, Mr. Brooks testified that Complainant asked Respondent to employ Mr. McCoy and Mr. Fabien. Mr. Brooks testified that Respondent employed Mr. Fabien as a laborer, but did not employ Mr. McCoy. Mr. Ruiz testified that of the five jobs for which Complainant sought payment from Respondent, Greenology had been involved only in the early stages of the Westra job, involving construction of a fireplace and chimney. Complainant did not seek payment from Respondent for this work. The Parties’ Business Transactions on the Jobs Mr. Brooks testified that because Mr. Fabien “would not listen” to Mr. Brooks, he asked Complainant to “guide” Mr. Fabien in performing work for Respondent. Mr. Brooks denied that Respondent ever hired Complainant as a supervisor, only as a “coordinator,” and testified that Respondent paid Mr. Fabien directly, except on one occasion on the Libby Lane job, when Complainant requested that Respondent pay him monies to disperse to Mr. Fabien and three of his friends who worked on the job. Mr. Brooks testified that he gave Respondent’s check for $6,000.00 dated September 30, 2010, made payable to Mr. McCoy, to Complainant, even though Respondent did not employ Mr. McCoy. This was done at Complainant’s request because he did not want the check to be made out to Greenology, to whom Respondent owed the money. Respondent submitted copies of four checks made payable to Complainant: (1) A check dated October 1, 2010, in the amount of $2,000.00 for Libby Lane; (2) A check dated October 25, 2010, in the amount of $325.00 for Forsman (Libby Lane); (3) A check dated November 1, 2010, in the amount of $250.00 with no notation; and (4) A check dated November 12, 2010, in the amount of $2,100.00 for S O S Creekside. Respondent also submitted numerous checks made payable to Mr. Fabien, dated between October 10, 2010, and December 10, 2010. Mr. Brooks testified that all of his checks to Complainant and Mr. Fabien were for labor. Mr. Brooks testified that Respondent paid Complainant everything that it owed for Complainant’s work on the five jobs. Mr. Brooks testified that Respondent did not have any agreements with Complainant to share profits on any of the jobs, with the exception of the Witt job. Mr. Brooks testified that he agreed that Respondent would pay Complainant a $7,000.00 “kickback” on the Witt job if Respondent made a $20,000.00 profit. Mr. Brooks testified that Respondent did not pay any kickback to Complainant on the Witt job because Respondent was “upside down” and lost $4,000.00 on the job. Complainant testified that he paid $2,250.00 for building supplies and for the cost to deliver the materials to the Witt job. Complainant submitted invoices for the materials that he allegedly supplied, and the suppliers’ invoices showed that the materials were purchased on Greenology’s accounts. Mr. Brooks denied that Respondent authorized Complainant to purchase materials for the Witt job or that the materials that Complainant allegedly purchased were used on the Witt job. Complainant submitted an S O S change order to Respondent dated December 3, 2010, in the amount of $845.00 for a compaction test on the Witt job. Complainant also submitted an invoice from Quality Testing, L.L.C. dated November 18, 2010, addressed to Respondent, to Complainant’s attention, in the amount of $288.40, marked “paid in full” for compaction testing at the Witt job. Mr. Brooks denied that Respondent ever authorized Complainant to perform compaction testing at the Witt job, that such testing was necessary, or that Respondent derived any benefit from the testing. Mr. Brooks testified that Complainant “did things without [Respondent’s] asking.” Mr. Brooks testified that S O S had not paid Respondent in full for the Witt job because the homeowner had withheld an $8,000.00 payment. Complainant submitted an undated S O S change order in the amount of $1,350.00 for stucco on the block wall on the Westra job. Complainant signed the change order on Respondent’s behalf. Complainant submitted suppliers’ invoices in the total amount of $2,207.00 for materials that Complainant testified were used on the Westra job, but Complainant testified that he only wanted $2,000.00 from Respondent for materials for constructing the stucco and block wall on the Westra job. The record does not show how much Complainant paid for stucco on the Westra job. Mr. Brooks denied that Respondent authorized Complainant to purchase materials for the Westra job or that the materials that Complainant allegedly purchased were used on the job. Mr. Brooks testified that Respondent provided stucco for the S O S change order for stucco on the block wall, and that excess stucco materials were left at the Westra job. Complainant claimed that Respondent owed him $3,400.00 for demolition on the Libby Lane job. Although Complainant submitted the S O S purchase orders to Respondent for the Libby Lane job, he did not provide additional evidence of the work he allegedly performed. Complainant alleged that he was owed $450.00 for pouring and finishing concrete at the S O S Creekside job. Complainant did not provide additional evidence on this charge at the hearing. Mr. Brooks testified that Respondent submitted a bid to S O S and was awarded the subcontract for concrete on the S O S Creekside job. Mr. Brooks testified that Complainant sent Mr. Fabien to the S O S Creekside job, even though Respondent had not instructed Complainant or Mr. Fabien to perform any work on the job. Mr. Brooks testified that after S O S paid Respondent, it issued a check to Complainant for his work on the S O S Creekside job. Mr. Brooks testified that Complainant’s actions “alarmed” him, and that he sent e-mails to S O S superintendents, Mr. Booth and Mr. Tartaro, instructing them that they should not contact Complainant about Respondent’s subcontracts, because Mr. Brooks could not supervise Complainant. Complainant submitted two S O S purchase orders to Respondent for the American Traffic job in the total amount of $2,350.00. Mr. Brooks testified that Mr. Tartaro at S O S sent the purchase orders for the American Traffic job to Complainant, despite Mr. Brooks’ instructions. Mr. Brooks testified that he told Complainant that he should not perform the American Traffic job because Respondent could not supervise him. Complainant testified that he performed labor to sawcut and repour the sawcut at the American Traffic job. Complainant submitted an invoice dated February 28, 2011, from Vulcan Materials and Affiliates in the total of $1,753.15, of which Complainant testified $618.82 was for concrete on the American Traffic job. Complainant claimed a total of $1,800.00 for labor and materials at the American Traffic job. Complainant submitted checks from S O S to Respondent for the American Traffic job dated November 22, 2010, for $850.00 and dated April 7, 2011, for $1,500.00. Mr. Brooks testified that Mr. Tartaro told him that because S O S wanted to close out the books on the American Traffic job, he should send an invoice, and so Respondent sent an invoice “against [Mr. Brooks’] better judgment.” The e-mails On November 20, 2010, Mr. Brooks stated in an e-mail to Complainant that “I will reimburse you for stucco materials” on the Westra job. On December 10, 2010, Mr. Brooks sent another e-mail to Complainant, in relevant part as follows: Between Witt, Nelson and Westra, I’m broke. Ruben 9000 over budget. . . . I will have some money for you soon . . . .[4]

On December 14, 2010, Mr. Brooks sent another e-mail on his Blackberry to Complainant, in relevant part as follows: Without doing the math on all this. (I’m not home yet) If there was that much more ab brought in and $500 in fuel. If you are 2500 total in expenses at Witt then what takes us to about and I say about $38000. I borrowed $20,000 to do that job with a return of $24,000. To a friend Matt. At your table you said you wanted $7000 from Witt. Darrell this has gone so far south. Ruben will not return a call to finish Westra. Don’t know why, but under my license at this time I do not want any jobs done without my supervision. . . .

On December 20, 2010, Mr. Brooks sent another e-mail to Complainant, in relevant part as follows: Still waiting for the job cost at witt I have westra stucco Ya I know it doesn’t do either one of us any good. I guess if Ruben doesn’t want to finish the job, then I’ll find someone who will What all needs to be completed by ruben. When r u going to tell me whats going on? Or r u just going to stiff me? I’m not stiffing no one. . . . Can’t you see that Ruben went so far over budget and I just kept writing him checks! I don’t understand how anyone is getting stiffed but me. Westra was open check book and so was Witt. I can’t keep paying for peoples mistakes. Someone must be held responsible. . . . And you want $10,100 for??? So I can be $30,000 upside down. Don’t think so Darrell. I’m waiting to hear on Westra and then I will repay you I have not seen any cost/receipts at witt

CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[5] The parties agreed at the hearing that Respondent’s business relationship in all five jobs at issue was with Complainant, not Greenology, and that Complainant referred the S O S subcontracts to Respondent to avoid sharing Greenology’s profits with his estranged partner, Mr. Ruiz. Therefore, Greenology is not a proper party to this administrative complaint. Respondent moved to dismiss the complaint because if Complainant contracted with Respondent on his own behalf, Respondent argued that A.R.S. § 32-1153 prevents Complainant from prosecuting his complaint because he is not licensed. In the alternative, Respondent argued that if Complainant was allowed to prosecute his complaint, Complainant should recover no more than $1,000.00 under A.R.S. § 32-1121(A)(14). The proponent of a motion bears the burden to establish grounds to support the motion.[6] A.R.S. § 32-1153 specifically concerns court actions.[7] Under well- established authority, an administrative complaint to the Registrar is not a court action.[8] A.R.S. § 32-1153 therefore does not prevent Complainant from making a complaint to the Registrar for monies that Respondent owes him for contracting, even though Complainant is unlicensed. Respondent argued that if A.R.S. § 32-1153 allows Complainant to make a complaint for nonpayment against Respondent to the Registrar, A.R.S. § 32- 1121(A)(14) limits the amount that Complainant can recover to $1,000.00. A.R.S. § 32-1121(A)(14) concerns “[p]ersons who are not required to be licensed” and includes the so-called “handyman’s exemption,” as follows: Any person other than a licensed contractor engaging in any work or operation on one undertaking or project by one or more contracts, for which the aggregate contract price, including labor, materials and all other items . . . is less than one thousand dollars. . . . The work or operations which are exempt under this paragraph shall be of a casual or minor nature. This exemption does not apply: . . . .

(b) In any case in which the work or construction is only a part of a larger or major operation, whether undertaken by the same or a different contractor . . . .

“In applying a statute, . . . its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”[9] The handyman exemption allows an unlicensed person to file a court action for nonpayment against a property owner if he meets A.R.S. § 32- 1121(A)(14)’s requirements, notwithstanding A.R.S. § 32-1153, and to avoid liability under A.R.S. § 32-1151[10] because he is not required to be licensed. By its terms, A.R.S. § 32-1121(A)(14) does not limit an unlicensed person’s recovery under A.R.S. § 32-1154(A)(11)[11] from a licensed contractor like Respondent who contracted with the unlicensed person. With respect to the statutory violations charged in the Registrar’s Citation and Complaint, Complainant bears the burden of proof to establish Respondent’s violations by a preponderance of the evidence.[12] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[13] Although Complainant established that he had some agreement with Respondent regarding compensation for the S O S subcontracts that he referred to Respondent, Complainant did not establish that Complainant provided labor or materials pursuant at Respondent’s request or that Respondent violated A.R.S. § 32-1154(A)(11) by failing to pay Complainant for the Libby Lane job, the Westra job, the S O S Creekside job, and most of the Witt job. Complainant established that Respondent knew about and acquiesced in the compaction test that he had performed at the Witt job and the concrete work that he performed at the American Traffic job. Therefore, Complainant established that Respondent failed to pay him $288.00 for the compaction test on the Witt job and $1,800.00 for the concrete work on the American Traffic job, for a total of $2,088.00, in violation of A.R.S. § 32- 1154(A)(11). Mr. Brooks acknowledged at the hearing that Respondent had an agreement with Complainant to “coordinate” Mr. Fabien’s work on Respondent’s subcontracts with S O S, even though Respondent did not employ Complainant and knew that he was unlicensed. Therefore, Complainant established that Respondent entered into a contract with an unlicensed contractor for work to be performed for which a license was required, in violation of A.R.S. § 32-1154(A)(14).[14] RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order in this matter, Respondent T K Brooks Contracting, Inc. dba T M B Contracting’s License No. ROC176589 be suspended until it has paid Complainant Darrel McCoy $2,088.00. 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 Respondent that it has paid Complainant $2,088.00 by certified or cashier’s check, then the Registrar shall not suspend Respondent’s license but, instead, close Case No. 2011-909. It is further recommended that, in addition to any license suspension that may result from this matter, Respondent’s Class KB-2 license be placed on disciplinary probation for a period of 60 days, commencing on the effective date of the Registrar’s order or the date on which Respondent files notice of compliance, whichever is later. 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 19, 2011. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Citation and Complaint was issued with Greenology, L.L.C. as the named party complainant, apparently at the suggestion of Respondent’s attorney. The complaint in this matter was filed by Darrel McCoy, Greenology, L.L.C.’s qualifying party and managing member, acting on his own behalf. Because Mr. McCoy individually, not Greenology, L.L.C., is the party with whom Respondent contracted, the Administrative Law Judge has reinstated Mr. McCoy as the Complainant.

[2] Because the record does not contain the full addresses or full name of the homeowners, the recommended decisions refers to the jobs by the names that Complainant gave them. [3] In November 2010, Complainant sued Mr. Ruiz and his wife in Maricopa Case No. CV2010-099995 to dissolve their partnership in Greenology and to be awarded civil damages for various claims. See Respondent’s Ex. 7. [4] Because Complainant argued that the informal communications in the e- mails constituted proof of the parties’ contract, the Administrative Law Judge provides a verbatim quotation of some of the e-mails. Because the e- mails contain numerous grammatical, spelling, and other errors, the Administrative Law Judge does not note these errors. [5] See 32-1101 et seq. [6] See A.A.C. R2-19-119(B)(3). [7] This statute concerns “Proof of license as prerequisite to a civil action” and provides:

No contractor as defined in section 32-1101 shall act as agent or commence or maintain any action in any court of the state for collection of compensation for the performance of any act for which a license is required by this chapter without alleging and proving that the contracting party whose contract gives rise to the claim was a duly licensed contractor when the contract sued upon was entered into and when the alleged cause of action arose.

(Emphasis added.) [8] See Semple v. Tri-City Drywall, Inc., 172 Ariz. 608, 611-612, 838 P.2d 1369, 1372-73 (App. 1992) (Prevailing party in administrative claim before Registrar of Contractors was not entitled to attorney’s fees from its opponent under A.R.S. § 12-341.01(A) because administrative hearing is not an “action”). [9] Mid Kansas Federal Savings and Loan Ass’n of Wichita v. Dynamic Development Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991). [10] A.R.S. § 32-1151 prohibits engaging in contracting without a license and provides in relevant part as follows:

It is unlawful for any person . . . to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor's license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter. . . .

(Emphasis added.) [11] A.R.S. § 32-1154(A)(11) 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 when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.” [12] 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). [13] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [14] A.R.S. § 32-1154(A)(14) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[k]nowingly entering into a contract with a contractor for work to be performed for which a license is required with a person not duly licensed in the required classification.”

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