ALJDEC decisions subject to certification as final

2012A-820-ROC · Registrar of Contractors · 2013-03-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 1, 2013

APPEARANCES: Complainant appeared through attorney Richard Mack, Esq.; Respondent was represented by corporate President and Qualifying Party Robert J. Louis.

WITNESSES: Rick Hurula, Const. Manager, Show Low Mountain Ranch Walter Cave, Member of Respondent LLC Robert Louis

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant brings this action against Respondent alleging abandonment of a project. Respondent denies the allegation. This tribunal entered the complaint file received from the ROC into the record, along with Complainant’s marked Exhibits 2, 3, 5, 6, 11, 13, 18, 19, 20, and 24. Testimony was provided from witnesses listed above. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order finding no violation. FINDINGS OF FACT 1. Respondent is the holder of License No. A.070738-C, a commercial general engineering contracting license issued by the Registrar. The license authorizes Respondent to construct fixed works, including streets, roads, power and utilities plants, dams, hydroelectric plants, sewage and waste disposal plants, bridges, tunnels, and overpasses. Robert J. Louis is the Qualifying Party on the license. Administrative notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website on March 14, 2013, which shows that the license was voluntarily cancelled on January 26, 2012. 2. Complainant is a developer of the Show Low Mountain Ranch subdivision. In October 2010, Complainant hired Respondent to perform off- site improvements described as “Sewer, Water, Storm Drain for Show Low Mountain Ranch Phase 1A.”[1] The parties entered into a written contract that provided, in part: Provided that the Work has been 100% completed, Contractor may submit an application for final payment. It is agreed that the Work shall not be deemed 100% complete until the Owner has received a Final Letter of Acceptance from the governmental agency that issued the permit for the project, and/or any private utility company for whom the work was performed, and the Work has been accepted by the Owner.[2]

The contract also allowed for a 10% retention amount that was not payable until Respondent’s work was “accepted by Watco [private water utility], White Mountain Lakes Sanitation District [sewer], Navajo County and the Owner.”[3] 3. Respondent performed much of the work throughout 2011. According to the testimony of Robert Louis, Respondent’s President and Qualifying Party, on November 1, 2011, Respondent “closed it’s doors” and ceased doing business. However, Respondent still had workers at the jobsite for Show Low Mountain Ranch. 4. Rick Hurula, the project manager for Show Low Mountain Ranch who the Administrative Law Judge finds to be a reliable and credible witness, testified that neither Watco, nor the sanitation district, nor Navajo county have issued final letters of acceptance for the project. He also testified that Respondent has not yet presented a final bill to Complainant. 5. Hurula testified that there is a problem with a sewer force main installed by Respondent in that a surge valve is not working properly. Until Respondent corrects that problem, it is holding up the final acceptance of the project. He testified that Respondent has been informed of the problem and has taken the position that it is a manufacturer issue. Respondent has not corrected the problem. 6. Additionally, Hurula testified that one of Respondent’s material suppliers, Dana Kepner Company, placed a lien on the property for amounts past due from Respondent of approximately $90,000.00.[4] Watco would not give final approval until that lien was cleared. According to the testimony of Walter Cave, a Member of the Complainant LLC, Complainant paid $90,000.00 to Dana Kepner Company to clear the lien and settle a cause of action that had been brought against Respondent and Complainant based on the lien. 7. Hurula testified that Respondent was present on the jobsite for the last time in November or early December 2011. There was no indication to him that Respondent had “closed its doors” at that time. He did not learn of that circumstance until January 2012 when he discovered that Respondent’s license had been cancelled at Respondent’s request. Complainant then hired other contractors to finish some “punch list items” that were left by Respondent. The surge valve too has not been corrected. 8. There is also an issue between the parties concerning a change order. Hurula testified that the contract has provisions requiring written change orders that are issued prior to time that the change-order work is done.[5] Respondent submitted to Complainant a change order (#14 for approximately $360,000.00) for work that Respondent had already completed that was due to a “hard dig” situation.[6] Complainant rejected that change order due to lack of prior authorization and for the reason that the change order was not justified because Complainant had paid Respondent $11,000.00 to test the site at the start of the project.[7] 9. Robert Louis testified that Respondent did not abandon the project, as evidenced by his testimony that Respondent still had workers on the jobsite until November or early December 2011.[8] He testified that when he cancelled the license in January 2012, he believed that Respondent had substantially completed the project, and that if any other work needed to be done then the retention amount would cover it.[9] Respondent did not bill for the retention amount for that reason. 10. Complainant submitted a “cost sheet” that shows amounts that Complainant claims were paid by it to material suppliers for materials used by Respondent on the project and for punch list items that have been corrected by other contractors or need to be corrected by other contractors.[10] The cost sheet also includes “Const Management” costs and expenses. Complainant uses this sheet as a basis for a claim of restitution in the amount of $80,463.42. However, that amount is not substantiated because the underlying invoices and contracts are not provided, nor is confirmation of payment of any of those amounts. In addition, it is unclear what “Const Management” includes and that expense does not appear to be within the scope of Respondent’s responsibility. Therefore, the Administrative Law Judge finds that no specific amount of restitution is supported by the evidence. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[11] Further, the standard of proof at hearing is by preponderance of the evidence.[12] Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[13] Complainant has met that burden. 2. The Citation and Complaint alleges violation of Arizona Revised Statutes (A.R.S.) § 32-1154(A)(1): “Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” The term “abandonment” is not defined by the statute. Therefore, according to A.R.S. § 1-213, it “shall be construed according to the common and approved use of the language.” Also, that statute requires that “[t]echnical words and phrases and those which have acquired a peculiar and appropriate meaning in the law shall be construed according to such peculiar and appropriate meaning.” 3. According to the 1990 edition of Black’s Law Dictionary, abandonment in the context of a contractual relationship “implies not only nonperformance, but an intent not to perform which may be inferred from acts which necessarily point to actual abandonment.”[14] And Webster’s dictionary says that “abandon” can mean “to cease intending or attempting to perform.”[15] Thus, “abandonment” means to failure to perform with the intent to abandon. 4. Arizona case law construing mechanics’ and materialmen’s lien statutes also provides some help to determining the definition of the term “abandonment.” In Hayward Lumber & Inv. Co. v. Graham,[16] the Arizona Supreme Court addressed the time within which to file a lien claim, which begins at “completion” of a project. The Court noted that “abandonment is treated as completion for the purposes of determining the time within which the claim must be filed”[17] and that “the real question raised here is whether the evidence is sufficient to show abandonment” on a particular date.[18] After a discussion of cases from two other states with similar statutes and discussion of the applicable annotation in the American Law Reporter, the Court concluded: “Mere cessation of labor without evidence of an intent to abandon on the part of the lessee, is insufficient to constitute permanent abandonment with which to begin the period of limitation for the filing of mechanics' liens.”[19] Again, intent to abandon is key. 5. Finally, in Wahl v. Southwest Savings & Loan Ass’n,[20] the Arizona Court of Appeals addressed whether the cessation of work coupled with the filing of a bankruptcy petition by a general contractor constituted abandonment of a project for purposes of the same lien filing statute as the one construed in Hayward Lumber. The court found that while the filing of a bankruptcy petition is relevant to the determination, it is not, by itself, sufficient to show abandonment without evidence of intent to abandon: “We do not believe that the mere filing of the petition in bankruptcy, without more, is sufficient evidence of such abandonment . . . .”[21] The court further found that, in the case before it, there was no evidence of intent to abandon prior to the filing of the petition, and that there was insufficient evidence of intent to abandon after the filing of the petition.[22] 6. In the case brought against Respondent, the evidence does not show an intent by Respondent to abandon the project before it cancelled its license. There certainly were disputes between the parties,[23] but having workers on the jobsite through November 2011 is not consistent with an intent to abandon. Nor does Respondent’s failure to pay subcontractors show an intent to abandon. Thus, up until the time that Respondent cancelled its license in late January 2012, the evidence does not show an intent to abandon. 7. While the cancellation of the license is a significant event, and could be considered abandonment with the addition of other evidence, the Administrative Law Judge does not conclude that cancellation, by itself, shows abandonment. Here, Robert Louis credibly testified that Respondent believed it was substantially complete and that the retention amount would take care of any issues that Complainant had with the remainder of the work.[24] There is no evidence in this record that Complainant notified Respondent after the cancellation that the retention amount would not cover the issues. Thus, like the court in Wahl, the Administrative Law Judge does not find that the evidence shows intent to abandon prior to the license cancellation nor after it. 8. Complainant has failed to show a violation of A.R.S. § 32- 1154(A)(1). RECOMMENDED ORDER IT IS RECOMMENDED that Case No. 2012-820 against Tyers Contracting, Inc., be dismissed.

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, March 15, 2013.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibit 6 at Schedule A, p. 1. [2] Exhibit 6 at 2. [3] Exhibit 6 at Schedule A, p. 2. [4] Exhibit 18 at 7. [5] Exhibit 6 at 4. [6] Exhibit 11. [7] Exhibits 13 and 5. [8] This is consistent with Hurula’s testimony. [9] The retention amount was just under $70,000.00. [10] Exhibit 24. [11] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [12] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [13] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996). [14] Black’s Law Dictionary 3 (6th ed. 1990). Cf. Black’s Law Dictionary 2 (9th ed. 2009) (“The relinquishing of a right or interest with the intention of never reclaiming it.”). [15] Merriam-Webster’s Collegiate Dictionary 2 (11th ed. 2004). State v. Wise, 137 Ariz. 468, 470 n.3, 671 P.2d 909, 911 n.3 (1983) (referring to an "established, widely respected dictionary for the ordinary meaning" of a statutory term). [16] 104 Ariz. 103, 449 P.2d 31 (1968). [17] Id. at 105, 449 P.2d at 33. The applicable statute is A.R.S. § 33- 993. [18] Id. [19] Id. at 106, 449 P.2d at 34. [20] 12 Ariz. App. 90, 94, 467 P.2d 930, 934, vacated in part, 106 Ariz. 381, 476 P.2d 836 (1970) [21] Id. at 101, 467 P.2d at 941. [22] Id. [23] The various disputes that the parties have are mere contractual disputes that do not rise to the level of abandonment. [24] The record supports Respondent’s belief that it was substantially complete. Complainant’s argument that the contract required 100% completion is irrelevant. The contract defined “100% completion” and not substantial completion. Substantial completion, by definition is not 100% completion. Complainant’s argument is a contract dispute.

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