ALJDEC decisions subject to certification as final

2013A-2801-ROC · Registrar of Contractors · 2016-01-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 5, 2016, at 1:00 p.m. APPEARANCES: AM Signal Inc. (“Complainant”) was represented by Scott W. Hyder, Law Office of Scott W. Hyder, PLC; Continental Lighting and Contracting Inc. appeared through Debra Kay Herr (“Ms. Herr”), its vice president. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On or about November 13, 1998, the Arizona Registrar of Contractors (“the Registrar”) issued License No. A-17.140469-C for commercial electrical and transmission lines to Respondent. On or about October 10, 1998, the Registrar issued License No. C-11.139488- C for commercial electrical contracting to Respondent. Respondent is exempt from the requirement of a qualifying party on both licenses. Complainant is a distributor of traffic signal equipment. On or about June 14, 2013, Complainant’s president, Maureen Undzis (“Ms. Undzis”), filed a complaint with the Registrar alleging that Respondent owed Complainant $16,925.00 for video detection equipment that Respondent installed on an Arizona Department of Transportation (“ADOT”) job on State Route 89 in Sedona (“Sedona Dry Creek project”). At one point, the previous Registrar closed Complainant’s complaint. However, at Respondent’s request, the current Registrar reopened the complaint. On July 29, 2015, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10). Respondent timely answered the Citation and Complaint, admitting that it owed Complainant $16,725.00, but denying any statutory violation. Respondent affirmatively alleged that Respondent was unable to pay Complainant and that Respondent did not receive monies owed to it by the general contractor on the Sedona Dry Creek project, Combs Construction (“Combs”). The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, to schedule and to conduct an evidentiary hearing. A hearing was held on January 5, 2016. Complainant submitted five exhibits and presented the testimony of Ms. Undzis. Respondent submitted three exhibits and presented the testimony of Ms. Herr. Hearing Evidence Ms. Herr argued that the previous Registrar had closed the complaint because a conflict of interest between the Registrar and ADOT prevented the hearing from going forward. Ms. Herr did not provide any evidence, analysis, or authority to support her argument.[1] Complainant’s credit policy’s terms and conditions provide that payment is due from customers who purchase equipment within 30 days from the date of Complainant’s invoice.[2] Complainant supplied Respondent with equipment and materials that would provide video detection to control the flow of traffic for Respondent to install at the Sedona Dry Creek project. On May 12, 2012, Complainant and Respondent entered into a Joint Check Agreement under which Respondent agreed that Combs would issue joint checks to Complainant and Respondent for the Sedona Dry Creek project.[3] Complainant issued three invoices to Respondent for equipment and materials: (1) An invoice dated July 6, 2012, in the amount of $55,785.00; (2) An invoice dated September 4, 2012, in the amount of $840.00; and (3) An invoice dated October 16, 2012, in the amount of $300.00.[4] The total of the three invoices is $56,925.00. Respondent paid Complainant $30,000.00 on October 6, 2012, $10,000.00 on March 5, 2013, and $200.00 on August 13, 2014, for a total of $40,200.00.[5] Respondent did not pay Complainant $16,725.00 in principal for the equipment and materials that Complainant supplied for Respondent’s work on the Sedona Dry Creek project. Respondent installed most of the materials that Complainant supplied at the end of the Sedona Dry Creek project. By the end of the project, Combs did not issue joint checks to pay Respondent for installing the equipment and materials that Complainant had supplied for the Sedona Dry Creek project. Nonetheless, Respondent cashed the checks. On March 15, 2013, Ms. Undzis sent an email to Ms. Herr to request the status of the balance and to inquire why Complainant was not being issued joint checks. Ms. Herr responded in relevant part as follows: My last check was written out to just us in the amount of $16,273.24, due to the fact that I owed $6,250 to my attorney. I have attached a copy of the check stub to show you. So, I gave you $10,000, my attorney $6,250, and netted for my crews $23.24.[6]

Ms. Undzis sent an email to Misty Goodwin, the Controller of Combs, to inquire about whether Respondent had been paid in full for its work on the Sedona Dry Creek project. On May 2, 2013, Ms. Goodwin stated that “[w]e have paid [Respondent] in full” and on May 3, 2013, stated that, “[a]ccording to the project manager, [Combs] had already paid [Respondent] and since you did not pre-lien we had no knowledge of [Respondent] owing you that is why [Respondent is] responsible for paying you.”[7] Ms. Undzis also sent emails to Respondent’s president, Bruce Herr (“Mr. Herr”), who is Ms. Herr’s father. On May 3, 2013, Mr. Herr informed Ms. Undzis that “we were paid for your work already but had an issue with our supplier (which was illegal) and were forced to bring in attorneys to fight for our money. The supplier issue not only cost us legal fees, but $40,000 more dollars in unanticipated costs . . . .”[8] Ms. Herr testified that Combs increased the amount of boring on the project due to aesthetic concerns and that because boring is much more expensive than trenching, Combs did not pay Respondent all that was owed for the Sedona Dry Creek project. Ms. Herr testified that there were many change orders on the Sedona Dry Creek project. Ms. Herr testified that Respondent realized that some of the materials that Combs wanted to be installed on the Sedona Dry Creek project were manufactured in Mexico, which would violate the Buy American Act because this was a federal project. Ms. Herr testified that it cost Respondent another $80,000.00 to obtain the right materials. Ms. Herr testified that she paid $6,250.00 to Respondent’s attorney in the hope of getting more money for everyone. Ms. Herr testified that Respondent was forced to pay not only its own attorney’s fees out of Combs’ payments for the Sedona Dry Creek project, but also Combs’ and ADOT’s attorneys’ fees. Respondent submitted emails evidencing communications among the attorneys.[9] Ms. Herr testified that Complainant has also filed suit against Respondent in court. Ms. Herr testified that Respondent has not been paid in full for its work on the Sedona Dry Creek project and that when Mr. Herr and Ms. Goodwin said that Respondent had been paid, they meant that Respondent had received all the money that it was going to receive. Ms. Herr did not submit Respondent’s contract with Combs, change orders, or proof of any payments from Combs. Ms. Herr also did not submit the supplier’s invoice for the Mexican-made materials or the replacement supplier’s invoice for the American-made materials. Ms. Herr testified that in addition to the disagreements with Combs and ADOT and other problems on the Sedona Dry Creek project, she, her father, and her mother have all experienced medical problems.[10] She stated that things were looking up for Respondent and that it would eventually pay Complainant all that was owed. Administrative notice is taken of the Registrar’s public website on January 4, 2016. Both of Respondent’s licenses were current and in good standing. Respondent’s license history is excellent. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[11] Complainant bears the burden of proof to establish cause to discipline Respondent’s contractor’s licenses by a preponderance of the evidence.[12] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[13] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[14] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[15] A supplier may pursue an administrative claim for nonpayment against a contractor’s license as well as a civil action for breach of contract or unjust enrichment in a judicial forum. The different remedies are not exclusive.[16] Respondent did not dispute that Complainant was owed $16,725.00 for the supplies that it provided for Respondent to use on the Sedona Dry Creek project. A contractor’s inability to pay a supplier and nonpayment by the general contractor on a project are affirmative defenses that the contractor bears the burden to prove in a supplier’s administrative complaint for nonpayment under A.R.S. § 32-1154(A)(10). Respondent did not bear its burden to establish that that it did not receive sufficient money from Combs to pay the money that Respondent acknowledged that it owes Complainant. Ms. Herr made the legal argument that, regardless of whether a contractor has been paid for a subcontractor’s work, the contractor can avoid a violation of A.R.S. § 32-1154(A)(10) if it has chosen to spend the money it received from the general contractor on attorney’s fees, thereby depriving the contractor of the present ability to pay. A.R.S. § 32-1154(A)(10) 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.” [Emphasis added.] “[T]he best and most reliable index of a statute’s meaning is its language and, when the language is clear and unequivocal, it is determinative of the statute’s construction.”[17] Courts “generally construe a statute written in the disjunctive as setting out separate and distinct alternatives.”[18] “[E]ach word, phrase, clause, and sentence must be given meaning so that no part of the statute will be void, inert, redundant, or trivial.”[19] Respondent’s interpretation of A.R.S. § 32-1154(A)(10) renders superfluous the second half of the disjunctive and renders irrelevant the condition of receipt of payment for the supplier’s materials for liability under the statute if the contractor’s inability to pay was caused by its choice to spend the money elsewhere that it received from the general contractor for installing the supplier’s materials. Respondent’s interpretation contradicts the plain and unequivocal language of the statute. Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(10). RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final order in this matter, License Nos. A-17.140469-C and 139488-C of Respondent Continental Lighting and Contracting Inc. shall be suspended until Respondent pays Complainant Continental Lighting and Contracting Inc. the sum of $16,725.00. It is further recommended that if, prior to the effective date of the final order, the Registrar receives proof in writing from Respondent that it has paid Complainant $16,725.00 in certified funds, the Registrar shall not suspend Respondent’s licenses but, instead, shall close Case No. 2013- 2801. 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, January 15, 2016.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] As discussed at the hearing, the previous Registrar’s policy decision not to refer Complainant’s complaint for non-payment to the OAH for an evidentiary hearing does not constitute a decision on the merits that forecloses the current Registrar from reopening the complaint and referring it to the OAH for a hearing. [2] See Complainant’s Exhibit 1. As also discussed at the hearing, A.R.S. § 32-1154(A)(10) does not by its terms include as grounds for discipline against a contractor’s license its failure to pay interest, attorney’s fees, or other penalties that the credit policy may provide. [3] See Complainant’s Exhibit 4. [4] See Complainant’s Exhibit 2. [5] See Complainant’s Exhibit 3. The August 13, 2014 payment for $200.00 was made after Complainant filed the complaint with the Registrar. [6] Complainant’s Exhibit 5 at 2. [7] Id. at 5, 7. [8] Complainant’s Exhibit 5 at 4. [9] See Complainant’s Exhibit B. [10] See Complainant’s Exhibit A. [11] See 32-1101 et seq. [12] 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). [13] See A.A.C. R2-19-119(B)(2). [14] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [15] Black’s Law Dictionary at page 1220 (8th ed. 1999). [16] See Bentivegna v. Powers Steel & Wire Products, 206 Ariz. 581, 585 ¶ 15, 81 P.3d 1040, 1044 (App. 2004) (“To fully protect a plaintiff’s rights, he must be allowed to seek money damages in courts in addition to any remedies available through the ROC complaint procedures.”). [17] Jansen v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991) (quoted in Bentivegna, 206 Ariz. at 587 ¶ 20, 81 P.3d at 1046). [18] United States v. Behnezhad, 907 F.2d 896, 898 (9th Cir. 1990) (citing Azure v. Morton, 514 F.2d 897, 900 (9th Cir. 1975)). [19] Walker v. City of Scottsdale, 163 Ariz. 206, 210, 786 P.2d 1057, 1061 (App. 1990) (citing City of Phoenix v. Yates, 69 Ariz. 68, 72, 208 P.2d 1147, 1149 (1949); United States v. Mehrmanesh, 689 F.2d 822 (9th Cir. 1982)).

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