ALJDEC decisions subject to certification as final

2012A-3504-ROC · Registrar of Contractors · 2013-01-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 17, 2012, at 1:00 p.m. APPEARANCES: Boss Grading and Construction Clean Up Inc (hereinafter “Complainant”) appeared through its authorized representative and office manager, Tiffany Nicole Millsap. Kinney Construction Services Inc (hereinafter “Kinney”) appeared through its qualifying party, Timothy J. Kinney. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT 1. Kinney is the holder of License No. KA.206588-D issued by the Registrar of Contractors. 2. This is a commercial matter where Kinney was a general contractor for a construction project located at the Star School in Flagstaff, Arizona. Complainant was a subcontractor for an entity identified as Yellow Feather LLC. Yellow Feather LLC was a subcontractor for Kinney. 3. Complainant contacted Kinney when Yellow Feather LLC failed to pay Complainant for its completed construction work at the Star School project. When Kinney failed to pay Complainant for its construction work, Complainant filed a formal Complaint against Kinney with the Registrar of Contractors alleging that Kinney owed Complainant the sum of $4,970.15. 4. Complainant’s vice-president, Ronald Douglas Millsap (hereinafter “Mr. Millsap”), testified that he signed the construction agreement with Yellow Feather LLC. Mr. Millsap stated that Complainant was hired as a subcontractor for Yellow Feather LLC to complete the construction project for Kinney. Mr. Millsap testified that Complainant furnished certificates of insurance to Kinney and that Kinney knew that Complainant was performing construction work at the construction site. Mr. Millsap testified that Complainant performed extra work for Yellow Feather LLC that was not in Complainant’s original construction agreement with Yellow Feather LLC.[1] 5. Mr. Millsap testified that Yellow Feather LLC prepared daily reports of the construction work performed by Complainant. Mr. Millsap stated that the daily reports were furnished to Yellow Feather LLC and to Kinney. Mr. Millsap testified that Complainant rented equipment that it utilized at the construction site. Mr. Millsap stated that Complainant has not been able to pay its vendors for materials and equipment rentals utilized at the construction site for Yellow Feather LLC and Kinney. Mr. Millsap testified that Complainant’s vendors have filed complaints against Complainant with the Registrar of Contractors.[2] 6. Mr. Millsap testified that Kinney’s employee, Carol, expressed surprise when Complainant transmitted proof of insurance to Kinney. Mr. Millsap stated that he did not know when Kinney learned that Complainant was performing construction work at the construction site. Mr. Millsap testified he worked every day at the construction project and believed that the daily reports prepared by Yellow Feather LLC were accurate. Mr. Millsap stated that all construction work performed by Complainant was authorized by Yellow Feather LLC and Kinney’s superintendant. Mr. Millsap testified that Yellow Feather LLC had a written change order with Kinney for the extra construction work performed by Complainant. Mr. Millsap stated that Complainant had also filed a complaint with the Registrar of Contractors against Yellow Feather LLC.[3] 7. Mr. Millsap testified that he was not aware that Yellow Feather LLC was contractually prevented from subcontracting work to Complainant without Kinney’s written approval. Mr. Millsap stated that he “pretty much” spoke with Kinney’s representative at the construction site on a daily basis.[4] 8. Tiffany Nicole Millsap (hereinafter “Ms. Millsap”) testified that she is Complainant’s office manager. Ms. Millsap stated that she repeatedly spoke with an employee of Respondent, identified as “Carol,” during the construction project. Ms. Millsap testified that Complainant had not been paid anything for its construction work at the construction project. Ms. Millsap stated that Complainant filed a claim against Kinney’s bond company that was denied because Complainant did not have a construction agreement directly with Kinney.[5] 9. Ms. Millsap testified that Complainant has suffered severe financial difficulties because Complainant was unable to pay its vendors for materials utilized at the construction project because Complainant was not paid for its construction work. Ms. Millsap stated that Complainant was not aware of the amount that Yellow Feather LLC had been paid by Kinney before Complainant started its work. Ms. Millsap testified that Yellow Feather LLC informed Complainant that Kinney had failed to pay for Yellow Feather LLC’s work at the construction project.[6] 10. Timothy J. Kinney (hereinafter “Mr. Kinney”) testified that Kinney had a contract with Yellow Feather LLC. Mr. Kinney stated that pursuant to the terms of the contract, Yellow Feather LLC was prevented from subcontracting or assigning any of the construction work set forth in the contract unless Kinney provided written approval. Mr. Kinney stated that Yellow Feather LLC had a prior problem with a previous unlicensed subcontractor at the construction site. Mr. Kinney stated that Kinney excluded the unlicensed contractor from the construction project and required Yellow Feather LLC to return to the construction site to complete the construction project. Mr. Kinney stated that Yellow Feather then entered into a construction agreement with Complainant.[7] 11. Mr. Kinney testified Kinney had paid Yellow Feather LLC up to 96% of its contract when Yellow Feather LLC entered into its contract with Complainant. Mr. Kinney stated that during the time period that Complainant was on the construction project, Yellow Feather LLC inflated its alleged costs for the construction project. Mr. Kinney testified that Kinney overpaid Yellow Feather LLC for the construction project. Mr. Kinney stated that Yellow Feather LLC owed Kinney $17,000.00 for the overpayment.[8] 12. Mr. Kinney testified that Kinney has suffered extensive damage as a result of Yellow Feather LLC’s actions in this matter. Mr. Kinney stated that he was onsite infrequently. Mr. Kinney stated that he did not remember seeing Complainant at the construction site. Mr. Kinney testified that he had been informed that Complainant was performing construction work for Yellow Feather LLC at the construction site. Mr. Kinney stated that he did not ask to have Complainant removed from the construction site.[9] 13. Kinney’s subcontract agreement with Yellow Feather LLC provided, in pertinent part, as follows: Subcontractor shall not let, assign the proceeds, subcontract, piecemeal, or otherwise transfer the Subcontract of any part thereof, or any interest therein, without the written consent of Contractor.[10]

14. Kinney’s project manager, Pete Everett (hereinafter “Mr. Everett”), testified that Yellow Feather LLC over-billed Kinney for the construction work that Yellow Feather LLC performed at the construction project. Mr. Everett stated that Yellow Feather LLC double-billed Kinney for work that was performed at the construction site. Mr. Everett testified that there were also back-charges against Yellow Feather LLC for work that Yellow Feather LLC did not perform. Mr. Kinney stated that Yellow Feather LLC would more than double the amounts that Complainant charged Yellow Feather LLC for work that Complainant performed at the construction site. Mr. Everett testified that he believed that Yellow Feather LLC was aware that it had been fully paid for the construction project when Yellow Feather LLC entered into a contract with Complainant.[11] 15. Mr. Everett testified that he was aware that Complainant was working at the construction project from April 9, 2012, through April 20, 2012. Mr. Everett stated that he did not ask Complainant to leave the construction project. Mr. Everett testified that he did not believe that it was his responsibility to inform Complainant of Yellow Feather LLC’s financial problems. Mr. Everett stated that, at first, he was unaware that Complainant was a separate construction company from Yellow Feather LLC. Mr. Everett testified that the amount of money left on Yellow Feather LLC’s construction contract should have been enough to complete the scope of work left for Yellow Feather LLC at the construction project. Mr. Everett stated that at the end of “pay-application number 3,” there was still $14,768.00 left on Yellow Feather LLC’s contract. Mr. Everett testified that he was not aware that Yellow Feather LLC’s contract with Complainant exceeded the amount owed to Yellow Feather LLC.[12] CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by a preponderance of the evidence. See A.A.C. R2-19-119. 2. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). 3. Complainant entered into a subcontract agreement with Yellow Feather LLC. Pursuant to the terms of its construction agreement with Kinney, Yellow Feather LLC was precluded from entering into a subcontract agreement for the construction project unless Kinney provided Yellow Feather LLC with written approval for the subcontract. There was no credible evidence that Kinney provided Yellow Feather LLC with written approval for Yellow Feather LLC’s construction agreement with Complainant. This Tribunal concludes that Complainant failed to sustain the requisite burden of proving the existence of a valid liquidated debt properly due and owing by Kinney and thus, has not sustained the burden of proving that Kinney violated the charged provision of A.R.S. § 32- 1154(A)(11).[13] RECOMMENDed order In view of the foregoing, it is recommended that this Citation, together with the Complaint that it is based upon, be dismissed. In the event of certification of this 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 the certification. Done this day, January 4, 2013.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] 12/17/12 Hearing Record (Hereinafter “H.R.”) at 11:30-14:02. [2] H.R. at 14:03-23.22. [3] H.R. at 23:23-31:50. [4] H.R. at 31:51-32:30. [5] H.R. at 32:31-35:48. [6] H.R. at 35:49-45:34. [7] H.R. at 45:35-52:12. [8] H.R. at 53:13-56:12. [9] H.R. at 56:13-1:01:32. [10] See Exhibit No. R-2 (Subcontract Agreement). [11] H.R. at 1:01:50-1:11:34. [12] H.R. at 1:11:35-1:18:14. [13] A.R.S. § 32-1154(A)(11) includes among the grounds for disciplinary action against a contractor’s license, failure by a licensee or agent or official of 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.

-----------------------

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