ALJDEC decisions subject to certification as final

2015A-2829-ROC · Registrar of Contractors · 2016-01-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 5, 2016 APPEARANCES: Chris Estrada for Complainant; John Conley, Esq. for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden _____________________________________________________________________ FINDINGS OF FACT 1. On November 18, 2015, the Registrar of Contractors (“ROC”) issued a Notice of Hearing setting the above-captioned matter for hearing on January 6, 2016, at the Office of Administrative Hearings in Phoenix, Arizona. 2. Respondent Miko Mechanical LLC (“Miko”), holds license numbers CR39.277866-D, CR37.277867-D, C-4.277868-C issued by ROC.[1] Michael Joseph Ervin is a member the LLC and the qualifying party. 3. The Complainant is Extreme Drywall Concepts LLC (“Extreme”); Chris Anthony Estrada is Extreme’s qualifying party. 4. Miko entered a contract with an entity called GEPACK – First Industrial Trust (the “prime contract”). Livewire was acting as GEPACK’s agent. 5. In January 2015, Miko and Extreme a subcontract under which Extreme was to furnish labor and materials at the GEPACK project. The subcontract refers to it as the “1027 – GEPACK – Livewire job”. 6. Extreme completed its work and Miko owes it $21,900.00, which Miko acknowledges. 7. Miko however asserts that the amount owed is not yet due because Miko has not been paid by GEPACK. 8. The subcontract shows that Miko is under no obligation to pay Extreme until Miko receives from GEPACK payment for the work that Extreme completed. The subcontract also shows that if Miko has itself not been paid for Extreme’s work, then Miko is not required to pay Extreme until it does get paid. 9. Miko acknowledges that it has not paid Extreme, but Mr. Ervin testified that Miko has not been paid by GEPACK and is itself owed over $200,000 for work completed under the terms of the prime contract; once Miko receives payment from GEPACK, it will pay Extreme. 10. Mr. Estrada testified as to his belief that Miko has been paid $100,000 for work completed at the GEPACK project. 11. In support of Mr. Estrada’s testimony, Extreme had admitted into evidence portions of various documents including a letter from Miko’s attorneys to GEPACK, Livewire, and First Industrial showing that Miko had billed these entities $301,085.17, and had been paid only $100,000.00. Exhibit A. 12. Extreme’s Exhibit A also has “pay-apps” that in Mr. Estrada’s opinion show that Miko has been paid. 13. Mr. Ervin acknowledged that the pay-apps had been submitted to GEPACK/Livewire, but added that Miko had not received any payment for the work covered by those pay-apps. 14. Mr. Ervin testified to the effect that Miko had entered into two contracts with GEPACK that involved work at the same location. Mr. Ervin later testified to a slightly different effect, in that he appeared to acknowledge that there was only one contract, but two phases or two projects. 15. The first contract or phase involved work on the process-piping and the second on the HVAC and other systems. Extreme’s subcontract was for work under the second phase. 16. Mr. Ervin acknowledges that Miko had been paid $100,000 for its work on the first contract/phase, but he also testified that Miko has not been paid for the work completed under the second contract or second phase. 17. Miko has filed a civil lawsuit against the other parties to the prime contract. 18. Miko has filed a lien against First Industrial in the amount of $52,546.52, which was based on the time and material charges accrued in the twenty-day time frame for which a lien could be filed, but Mr. Ervin reaffirmed his opinion that Miko is owed more than the lien amount. 19. On July 1, 2015, Extreme filed with ROC a Complaint against Miko. 20. On July 28, 2015, ROC issued a Citation alleging that Miko may have violated Ariz. Rev. Stat. section 32-1154(A)(10). CONCLUSIONS OF LAW 1. A party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119. 2. A preponderance of the evidence is: The 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.

Black’s Law Dictionary 1373 (10th ed. 2014). 3. Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes."). 4. “Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B). 5. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). 6. Ariz. Rev. Stat section 32-1154(A) provides that The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: ***** 10. 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.

7. “A construction contract shall not alter the rights of any contractor, subcontractor or material supplier to receive prompt and timely payments as provided under [Title 32, Chap. 10, Art. 2.].” Ariz. Rev. Stat. § 32-1129.01(P). 8. Miko, citing, L. Harvey Concrete v. Agro Construction and Supply Company, 189 Ariz. 178 (App. 1997), argues that the subcontract created a valid condition precedent, such that it is not required to pay Extreme until it is paid by GEPACK. 9. The subcontract shows that Extreme was not entitled to be paid until Miko itself received payment for Extreme’s work, and does so with sufficient particularity to meet the requirements for a condition precedent set out in L. Harvey Concrete. 10. Extreme argues under Ariz. Rev. Stat. section 32-1129.01(P) the subcontract cannot “alter the rights of any contractor, subcontractor or material supplier to receive prompt and timely payments” under the applicable statutes. But Extreme did not show that there were any statutory rights “altered” by the subcontract. 11. Extreme argues to the effect that because Miko was paid the $100,000, Miko must now pay Extreme. 12. The preponderance of the evidence does not show that Miko has been paid for Extreme’s work. As such, based on the subcontract, there is no amount “due” to Extreme within the meaning of Ariz. Rev. Stat. section 32-1154(A)(10). 13. The preponderance of the evidence does not show that Miko Mechanical LLC violated Ariz. Rev. Stat section 32-1154(A)(10) as alleged. ORDER IT IS ORDERED that the Citation and Complaint in Case No. 2015-2829 are 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 is forty days after the date of that certification.

Done this day, January 25, 2016.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] ROC’s website shows Miko Mechanical LLC’s license numbers as 277866, 277867, and 277868. Consistent with existing policy, in this Decision the numbers set out in the Notice of Hearing’s caption are used.

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

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