ALJDEC decisions subject to certification as final

2012A-306-ROC · Registrar of Contractors · 2012-07-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 25, 2012, and June 14, 2012 APPEARANCES: Swabs Az, Inc. was represented by its authorized representative, Bill Evans. Simmons Construction, L.L.C. was represented by its authorized representative, Todd Simmons. 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. Swabs AZ, Inc. (“Complainant”) is the holder of License No. B-1.255191- C issued by the Registrar of Contractors (“Registrar”). 2. Simmons Construction, L.L.C. (“Respondent”) is the holder of License No. B-1.151737-C issued by the Registrar. 3. On January 17, 2012, Complainant filed a written Complaint with the Registrar alleging non-payment by Respondent for work performed by Complainant on a project located at 9251 W. Scotland Avenue, Peoria, Arizona. Complainant’s Complaint alleged that Respondent owed Complainant the sum of $136,500.00. 4. The Registrar designated Complainant’s Complaint as Case No. 2012-306. 5. In response to the Complaint, the Registrar issued a Citation and Complaint in Case No. 2012-306 charging Respondent with violating the provisions of A.R.S. § 32-1154(A)(13), specifically A.R.S. § 32-1129. The Registrar forwarded Case No. 2012-306 to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 6. At the hearing on May 25, 2012, the parties agreed to amend the Citation and Complaint from a charged violation of A.R.S. § 32-1129 to a charged violation of A.R.S. § 32-1129.02, which is the Arizona “prompt pay” statute. Complainant’s representative provided proof that Complainant had posted the required cash deposit of $500.00. Both parties acknowledged at the hearing that they had notice of the prompt pay claim and each side addressed it during the hearing. 7. The parties entered into a written Agreement Between General Contractor and Subcontractor dated May 25, 2011 (“Agreement”) for the Scotland Yard Neighborhood Park Project (“the project”). 8. Complainant presented testimony and evidence that Respondent failed to pay Complainant for work that Complainant completed prior to being terminated from the project by Respondent. Complainant also presented evidence and testimony that Respondent received compensation from the project owner for Complainant’s work. Complainant further asserted that Respondent admitted to owing Complainant for 40 percent of Complainant’s scope of work, or $78,000.00, but that Respondent refused to pay for that work until Complainant provided a bond, which Complainant contends was excluded under Article 17 of the Agreement. 9. Respondent produced testimony and evidence that Complainant had breached the parties’ Agreement by failing to properly mobilize for the project, despite billing Respondent for mobilization. Respondent further contended that Complainant failed to properly man its scope of work, resulting in delays, and that Complainant failed to timely order materials resulting in further delays. As a result of Complainant’s alleged failures to perform, Respondent terminated Complainant. Respondent argued that Respondent is liable to the City of Peoria, the project’s owner, for liquidated damages that exceed any amount of money that might otherwise have been due to Complainant. 10. Respondent has sued Complainant in civil court for damages. That lawsuit is pending in the Superior Court of Maricopa County. 11. Respondent’s position in this dispute is determined under all the circumstances to have been asserted in good faith and therefore, precludes a finding that a liquidated sum is owed to Complainant. The parties’ financial dispute should be resolved in their pending civil lawsuit, where each party can seek relief for their position, rather than in this administrative disciplinary proceeding before the Registrar. 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. § 32-1129.02(B) provides that a subcontractor who has performed in accordance with a construction contract is entitled to payment within seven days of receipt of payment by the general contractor. There is a bona fide dispute as to whether Complainant complied with its contractual obligations in this matter. Respondent asserts that Complainant breached its contractual duties, resulting in Respondent being potentially liable to the City of Peoria, the project owner, for liquidated damages because of delays. Therefore, the Administrative Law Judge concludes that Complainant failed to sustain its burden of proving that it fully complied with its contractual obligations and that, therefore, it is entitled to payment from Respondent for its work. 4. A.R.S. § 32-1129.02(C) provides that a general contractor may withhold funds from a subcontractor for any of the following reasons: 1. Unsatisfactory job progress. 2. Defective construction work or materials not remedied. 3. Disputed work or materials. 4. Failure to comply with other material provisions of the construction contract. 5. Third party claims filed or reasonable evidence that a claim will be filed. 6. Failure of the subcontractor to make timely payments for labor, equipment and materials. 7. Damage to a contractor or another subcontractor or material supplier. 8. Reasonable evidence that the subcontract cannot be completed for the unpaid balance of the subcontract sum. 9. The owner has withheld retention from the contractor, in which case the amount of the retention withholding by the contractor shall not exceed the actual amount of the retention retained by the owner pertaining to the subcontractor's work.

5. The evidence of record established that there is a bona fide financial dispute between the parties that should be properly resolved in their pending civil lawsuit rather than in this administrative disciplinary proceeding before the Registrar. 6. The evidence of record supports the return of the $500.00 cash deposit to Complainant in this matter pursuant to A.R.S. § 32-1129.02(E). RECOMMENDED ORDER It is recommended that the Citation and Complaint in Case No. 2012- 306 be dismissed on the effective date of the Order entered in this matter. It is further recommended that the Registrar initiate payout procedures for the return of the $500.00 cash deposit to Complainant. 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, 2012.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors -----------------------

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