ALJDEC decisions subject to certification as final

2012A-528-ROC · Registrar of Contractors · 2012-08-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 20, 2012, at 8:00 a.m. APPEARANCES: Polygon U S Corporation f/k/a Munters Corporation (hereinafter “Complainant”) appeared through its attorney, John M. Sticht, Esq., of Jennings, Haug & Cunningham, L.L.P. Puroclean Water Mold Fire and Trauma Specialists Inc. (hereinafter “Puroclean”) appeared through its attorney, Suzanne L. Brei, Esq., of Brei Law Firm. 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. Puroclean is the holder of License No. K-5.248686-D issued by the Registrar of Contractors. 2. The parties entered into a written agreement for Complainant to provide the delivery, setup, rental, and monitoring of drying equipment to Puroclean for a water remediation project that Puroclean was performing at the Desert Rose Inn, 630 S. Village Loop, Benson, Arizona for the estimated sum of $50,000.00. 3. Complainant provided the agreed-upon drying equipment and labor and provided Puroclean with an invoice in the sum of $48,064.74 plus $3,981.20 in sales tax, for a total invoice amount of $52,045.94. 4. The Desert Rose Inn refused to pay Puroclean for the water remediation work based upon an allegation that Puroclean’s ineffective water remediation work had resulted in extensive mold damage to the hotel. 5. Puroclean filed a civil action against the Desert Rose Inn attempting to collect on its invoice. The insurance company for the Desert Rose Inn filed a civil action against Puroclean alleging over $90,000.00 in damages to the hotel as a result of Puroclean’s negligence, breach of contract, and breach of warranty. 6. After the Desert Rose Inn refused to pay Puroclean for its completed water remediation work, Puroclean failed to pay for the drying equipment and labor provided by Complainant. Complainant then filed a formal complaint against Puroclean with the Registrar of Contractors and a concurrent civil action. 7. Pursuant to the filing of the formal complaint with the Registrar of Contractors, a Citation and Complaint was issued charging Puroclean with an alleged violation of A.R.S. § 32-1154(A)(11). 8. Lorena L. Tiburcio (hereinafter “Ms. Tiburcio”) testified that Puroclean was a small family-owned company. Ms. Tiburcio acknowledged that Complainant provided the water remediation equipment required to perform the water remediation project at the Desert Rose Inn. Ms. Tiburcio stated that Complainant was to deliver, set-up, and monitor all of the drying equipment provided by Complainant.[1] 9. Ms. Tiburcio testified that Puroclean entered into a Change Order with Complainant for additional rental days for the drying equipment furnished by Complainant. Ms. Tiburcio stated that Puroclean did not inform Complainant of any dissatisfaction with the equipment or labor provided by Complainant within 14 days as provided in the parties’ contract. Ms. Tiburcio acknowledged that one of Puroclean’s employees certified that all work performed by Complainant was inspected and found to be completed to Puroclean’s satisfaction.[2] 10. Ms. Tiburcio testified that the Desert Rose Inn owed Puroclean the approximate sum of $132,000.00 for its completed water remediation work at the hotel. Ms. Tiburcio stated that if the hotel paid Puroclean for the completed water remediation project, Puroclean would pay Complainant.[3] 11. Ms. Tiburcio agreed that Puroclean had deposited $778,115.33 over the last eighteen months into its business account. Ms. Tiburcio asserted that she and her husband have deposited money from their personal account into Puroclean’s bank account on several occasions to keep the business operational. Ms. Tiburcio acknowledged that it was rare for her and her husband to deposit money into Puroclean’s bank account and that the majority of the money deposited was from Puroclean’s construction activities.[4] 12. Ms. Tiburcio testified that Puroclean did not have the ability to handle a project as large as the Desert Rose Inn project with its own employees and equipment. Ms. Tiburcio stated that Puroclean hired Complainant to perform the required drying services at the hotel. Ms. Tiburcio testified that Complainant’s onsite technician stayed in the hotel the entire time the hotel was drying and was taking moisture/temperature readings on a daily basis. Ms. Tiburcio stated that Complainant’s employee determined where to set the drying equipment and was responsible for ensuring that the equipment was operating properly and that Complainant’s employee informed Puroclean when the drying process was completed.[5] 13. Ms. Tiburcio testified that Puroclean’s certification that the hotel was properly dried was based, in part, on Complainant’s assurance to Puroclean that the drying process was complete. Ms. Tiburcio stated that the hotel declined to pay anything to Puroclean on the alleged basis that there was mold growth in the hotel as a result of the hotel not being properly dried.[6] 14. Ms. Tiburcio testified that the Complainant’s motion for summary judgment in the parties’ concurrent civil action had been denied by the Superior Court Judge on the basis that there were questions of fact as to whether Complainant contributed to the damages allegedly suffered by the Desert Rose Inn.[7] 15. Ms. Tiburcio testified that the Desert Rose Inn was claiming that it had suffered more than $90,000.00 in mold remediation expenses as a result of alleged improper water remediation work performed by Puroclean and Complainant.[8] 16. Ms. Tiburcio acknowledged that Puroclean was responsible to the Desert Rose Inn for the proper performance of all water remediation work at the hotel.[9] 17. Kevin Lockhard (hereinafter “Mr. Lockhard”) testified that he prepared Complainant’s bid for the Desert Rose Inn project based on information provided by Puroclean. Mr. Lockhard stated that Complainant’s employee delivered, set-up, and monitored the drying equipment provided by Complainant. Mr. Lockhard acknowledged that Complainant’s employee was constantly onsite while the water remediation work was being performed. Mr. Lockhard asserted that Puroclean was responsible for determining when things were dry and preventing mold growth. Mr. Lockhard stated that Puroclean was contractually responsible for all consequential damages at the hotel.[10] 18. Mr. Lockhard testified that if Complainant had been in charge of the project, it would have hired a third-party industrial hygienist to inspect the property and certify that the hotel had been completely dried.[11] 19. Mr. Lockhard acknowledged that his employee was on the water remediation project approximately eight hours a day for approximately one week. Mr. Lockhard acknowledged that Complainant’s employee performed more labor than simply setting the water remediation equipment up and monitoring its performance.[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. There was no dispute that a Superior Court Judge in the parties’ concurrent civil action has already ruled that there are questions of fact which preclude a summary judgment in the parties’ ongoing civil action. Such a ruling by the civil court precludes a finding that Puroclean is not acting in good faith in this matter. The Registrar of Contractors, acting through an administrative disciplinary hearing, is not empowered by law to adjudicate amounts alleged to be due and owing in the face of a good-faith dispute on such amounts. This Tribunal concludes that until and unless the claimed obligation is reduced to judgment by the civil court, no violation by Puroclean of the charged provision of A.R.S. § 32-1154(A)(11)[13] can be supported. RECOMMENDed order In view of the foregoing, it is recommended that this Citation, together with the Complaint upon which it is based, be dismissed on the effective date of the Order of the Registrar of Contractors. 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, August 28, 2012.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] 8/20/12 Hearing Record (hereinafter “H.R.”) at 11:24-14:08. [2] H.R. at 16:35-19:24. [3] H.R. at 19:30-19:53. [4] H.R. at 24:21-27:58. [5] H.R. at 29:30-32:45. [6] H.R. at 33:00-33:55. [7] H.R. at 36:02-36:39. [8] H.R. at 40:30-40:47. [9] H.R. at 50:42-54:02. [10] H.R. at 1:07:30-1:17:36. [11] H.R. at 1:18:30-1:18:48. [12] H.R. at 1:20:45-1:23:43. [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