ALJDEC decisions subject to certification as final

2012A-2548-ROC · Registrar of Contractors · 2013-03-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 7, 2013, at 8:00 a.m. APPEARANCES: Complainant New Western LLC appeared through Katrina Rios, its office manager; Respondent Boss Grading and Construction Cleanup Inc. appeared through Carolyn Millsap, its qualifying party and officer. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure[1] The Arizona Registrar of Contractors (“the Registrar”) issued License No. A.185425-C for general engineering to Boss Grading and Construction Cleanup Inc. (“Respondent”). The Registrar issued License No. A-14.197367-C for asphalt paving to New Western LLC (“Complainant”). Complainant’s business also includes renting out its equipment to other contractors. On or about May 16, 2012, Complainant filed a Complaint against Respondent with the Registrar alleging that Respondent owed Complainant $14,614.29 on a contract amount of $16,164.29 for a project located at 2626 East Pecos Road in Chandler, Arizona. Statements that Complainant attached to the Complaint indicated that the amounts allegedly owed included finance charges. On or about May 23, 2012, Respondent’s office manager, Tiffany Millsap (“Ms. Millsap”), filed an initial response to the Complaint, alleging that Respondent had a payment agreement with Complainant and was current on payments. Ms. Millsap stated that after Complainant alleged that it did not receive Respondent’s payment for April 2012, she confirmed that Respondent’s check had not been cashed, stopped payment on the check, and reissued the check. Ms. Millsap attached to Respondent’s May 23, 2012 initial response to the Complaint copes of three letters regarding the parties’ settlement agreement, as follows: 5.1 Ms. Millsap’s letter dated January 31, 2012, to Sharon English of Complainant’s outside collections company, Corporation Collections International, stating that although Respondent was not paid for all of its expenses on the project on Pecos Road, it was willing to start paying Complainant $300.00 per month beginning on February 1, 2012. Ms. Millsap’s January 31, 2012 letter to Ms. English further stated that in six months, Respondent would see if it could increase the amount of the payment and that although it could make no promises about amount of future monthly payments, it would pay at least $300.00 per month until Complainant was paid in full. 5.2 Ms. English’s February 6, 2012 letter in response to Ms. Millsap’s January 31, 2012 letter, stating that Complainant had approved a payment of $300.00 on or before February 20, 2012, a $1,250.00 payment on or before March 20, 2012, $300.00 monthly payments in April, May, and June 2012, $500.00 monthly payments in July, August, September, and October 2012, and starting in November 2012, increased monthly payments in an amount that Ms. English did not include in her February 6, 2012 letter. 5.3 Ms. Millsap’s February 6, 2012 letter stated that Respondent would do its best to comply with Ms. English’s proposed payment schedule, but that it would contact Ms. English if it was unable to comply with the payment schedule. Ms. Millsap informed Ms. English in her February 6, 2012 letter that Respondent would make payments directly to Complainant unless Ms. English directed otherwise. On or about June 11, 2012, Complainant’s office manager, Katrina Rios, sent a letter to the Registrar responding to Respondent’s initial response to the Complaint, in relevant part as follows: There is a payment plan, but it is in default. We did not receive a check for April even though we were told that 2 checks were mailed to us. We do have May’s check. We have repeatedly asked for a replacement for April [to] be issued and the complaint would be dropped. . . .

We would like to proceed with a hearing and citation against the license.

The Registrar’s staff informed Respondent that the matter would be scheduled for a hearing. On or about June 19, 2012, Ms. Millsap on Respondent’s behalf sent a letter to the Registrar responding to Complainant’s June 11, 2012 request for hearing, in relevant part as follows: In your letter you state that this is our final attempt to resolve the situation. We have made numerous attempts to resolve this situation with no help from [Complainant]. We have also provided you copies of all checks mailed to [Complainant] so you can see for yourself we are complying with our original agreement.

With this being said we are again attempting to resolve this issue by mailing yet a 3rd replacement check to [Complainant] for the April payment. I have attached a copy of the new check along with a copy of June 20th’s payment. It is our hopes [Complainant] will not [lose] these checks this time.

On or about July 2, 2012, Ms. Rios on Complainant’s behalf informed the Registrar that “[t]here is a payment plan, and it is current. Two checks were issued to cover the missing April payment and June’s payment. At this time we request that the complaint be dropped.” On or about August 1, 2012, Ms. Rios on Complainant’s behalf informed the Registrar that “[t]he payment plan is once again in default” and requested that the Registrar issue a citation against Respondent. On December 10, 2012, the Registrar issued a Citation and Complaint against Respondent charging a possible violation of A.R.S. § 32- 1154(A)(11). On or about December 21, 2012, Ms. Millsap on Respondent’s behalf filed a timely written answer to the Citation and Complaint denying any statutory violation, in relevant part as follows: [Respondent] has a payment agreement in writing with [Complainant]. This has been in effect since Feb 2012 and regular payments have been made as per the agreement.

To date all payments are current. I was notified last week they have not cashed the November 2012 payment and spoke with Sharon English regarding it. Once we were notified we started looking into it and the money order has not been cashed. We are resubmitting payment right away.

The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A was held on March 7, 2013. Complainant submitted three exhibits and presented Ms. Rios’s testimony. Respondent submitted one exhibit and presented the testimony of two witnesses: (1) Carolyn Millsap, Respondent’s qualifying party and officer (“Mrs. Millsap”); and (2) Ron Millsap, Respondent’s jobsite superintendent (“Mr. Millsap”). Hearing Testimony The parties agreed that Respondent rented equipment from Complainant for a project for Chandler Community College on East Pecos Road. The parties agreed that as of the date of the hearing, Respondent still owed Complainant $12,000.19 in principal under the settlement agreement. Complainant submitted an Unconditional Waiver and Release on Final payment that Respondent’s controller signed for the project. Mr. Millsap testified that rain delays caused Respondent to incur additional costs for equipment rental and labor but that the general contractor and property owner refused to payment for the additional costs. Mr. Millsap and Mrs. Millsap testified that Respondent was doing the best it could to pay Complainant for the additional costs that Respondent incurred for equipment rental due to the rain delay. The parties agreed that before Complainant filed the Complaint at issue, it had filed an earlier complaint with the Registrar to recover the amounts that Respondent owed for equipment rental. The parties agreed that in February 2012, the parties agreed to settle the first complaint. The record in this matter does not include the first complaint that Complainant filed with the Registrar or a written settlement signed by both parties unequivocally setting forth the terms of their agreement. Ms. Rios testified that Respondent made the payments required by the settlement agreement through November 2012, but that Complainant had not made any payments after November 2012. Ms. Rios testified that she made several efforts to collect payments from Respondent without success. Ms. Rios testified that Respondent breached the settlement agreement by failing to make the payment for November 2012. Ms. Rios argued that as a consequence of its breach, Respondent should be required to pay the full amount due to Complainant to avoid having its license suspended or revoked. Mrs. Millsap testified that Respondent sent the check for the November payment to Complainant, but that Complainant did not cash the check because Ms. Rios stated that it had not been received. Mrs. Millsap testified Respondent attempted to make additional payments to Complainant pursuant to the settlement agreement, but that Complainant refused to accept the payments unless Respondent increased the amount of the payments. Mrs. Millsap testified that Respondent was struggling to pay $300.00 per month and that it could not afford to pay more at this time. Respondent submitted copies of the checks and money orders that it provided to Complainant pursuant to the parties’ settlement agreement: (1) Respondent’s check no. 9735 in the amount of $300.00 dated February 7, 2012, for the initial payment; (2) Respondent’s check no. 9788 in the amount of $1,250.00 dated March 19, 2012, for the down payment; (3) Respondent’s check no. 9881 in the amount of $300.00 dated June 18, 2012, with the notation, “3rd replacement Check for April 1, 2012”; (4) Respondent’s check no. 7161 in the amount of $300.00 dated May 21, 2012, for the May payment; (5) Respondent’s check no. 9882 in the amount of $300.00 dated June 18, 2012, for the June payment; (6) Respondent’s check no. 7170 in the amount of $300.00 dated July 27, 2012, for the July payment; (7) Moneygram Money Order R105047232895 in the amount of $300.00 dated August 27, 2012, for the August payment; (8) Moneygram Money Order R105047226251 in the amount of $300.00 dated October 3, 2012, for the September payment; and (9) Moneygram Money Order R105277604861 in the amount of $300.00 dated November 2, 2012, for the October payment. Administrative notice is taken of Respondent’s prior License record as reflected on the Registrar’s public website on March 11, 2012. Such prior License record reflects that Respondent’s License No. A.185425-C is current, that one complaint is pending against the license, and that one complaint was closed as resolved/ settled/withdrawn. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[2] Complainant bears the burden of proof to establish Respondent’s statutory violation 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] Complainant agreed to withdraw the initial complaint that it filed with the Registrar in consideration for Respondent’s promise to pay monies under the settlement agreement. If Respondent established that it complied with the settlement agreement, it cannot be liable for a second violation of A.R.S. § 32-1154(A)(11).[6] During the parties’ settlement negotiations, Respondent offered to make payments in the amount of $300.00 per month. Complainant made a counteroffer that indicated that it would accept $300.00 for a time, but that it expected the amount of the monthly payment to increase over time. Respondent did not unequivocally accept Complainant’s counteroffer. Complainant accepted Respondent’s $300.00 payment for April 2012, May 2012, June 2012, July 2012, August 2012, September 2012, and October 2012. Although the record does not establish that parties’ settlement agreement included a day of the month after which Respondent’s monthly payment would be considered late, payments should be made during the month in which they are due. Although Respondent made payments under the settlement agreement later and later each month, as noted above, until December 2012, Complainant accepted late payments. Respondent established that the parties’ settlement agreement required it to pay Complainant $300.00 per month. Mrs. Millsap credibly testified that Respondent issued multiple replacement checks to Complainant after the initial checks were lost[7] and that after December 2012, Complainant refused to accept any further payments of $300.00 per month from Respondent. Material suppliers who enter into settlement agreements with licensed contractors cannot modify the terms of those agreements by filing successive complaints with the Registrar if it later appears that the settlement agreement was improvident. Complainant’s acceptance of Respondent’s late payments may allow Respondent to avoid civil liability for breach of contract but it does not allow Respondent to avoid a technical violation of A.R.S. § 32-1154(A)(11). Complainant’s attempt to modify the parties’ settlement agreement by filing this second Complaint with the Registrar and refusal to accept additional payments from Respondent in the amount set by the settlement agreement and the parties’ practice makes inappropriate any requirement by the Registrar that Respondent pay immediately the entire amount owed as a condition of keeping its license current. The parties agreed that Respondent still owes Complainant $12,000.19 for equipment rental on the Chandler Community College project and that Respondent has not made any payments under the settlement agreement since November 2, 2012. Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(11). RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final Order in this matter, Respondent Boss Grading and Construction Cleanup Inc.’s License No. A.185425-C shall be suspended until the Respondent submits, and the Registrar accepts, written proof that Respondent has paid Complainant New Western LLC $1,800.00 in certified funds for the $300.00/month payments for the six months from November 2012, through April 2013. It is further recommended that if Respondent submits, and the Registrar accepts, written proof that Respondent has paid Complainant New Western LLC $1,800.00 in certified funds for the $300.00/month payments for November 2012, through April 2013, Respondent’s license shall not be suspended and, instead, the Registrar shall close Complainant’s Complaint in Case No. 2012-2548. 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 five days from the date of that certification. Done this day, March 12, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The Background and Procedure section is based on documents that are contained in the electronic file that the Registrar of Contractors furnished to the Office of Administrative Hearings.

[2] See A.R.S. §§ 32-1151 to 32-1169. [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] 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.” [7] It may be prudent for Respondent either to hand-deliver and obtain a receipt for its payments or to send future payments to Complainant via certified mail until Respondent has fully performed the parties’ settlement agreement.

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