ALJDEC decisions subject to certification as final

2015A-420-ROC · Registrar of Contractors · 2015-12-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 4, 2015, at 3:00 p.m. APPEARANCES: California Averland Construction Inc. (“Complainant”) appeared through its Office Manager, John Chi (“Mr. Chi”); Brothers Construction LLC (“Respondent”) appeared through its Qualifying Party/Managing Member, Noe Arroyos (“Mr. Arroyos”). ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On July 3, 2009, the Arizona Registrar of Contractors (“the Registrar”) issued License No. CR11.256872-D for dual electrical contracting to Respondent. On March 11, 2014, the Registrar issued License No. KB-1.290390-D for dual building contracting to Respondent. Complainant is not a licensed contractor in Arizona. On January 29, 2015, Complainant filed a complaint with the Registrar against Respondent alleging that it “has abandoned contracted work left over for completion (fire damaged).” On June 26, 2015, the Registrar issued a citation charging Respondent with a possible violation of A.R.S. § 32-1154(A)(1).[1] After Respondent timely filed a written answer to the Citation and Complaint denying any statutory violation, the Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on December 4, 2015. Mr. Chi testified and submitted six exhibits on Complainant’s behalf. Mr. Arroyos testified and submitted three exhibits on Respondent’s behalf. The Registrar’s Investigator Jack Grimm also testified.[2] Hearing Evidence A fire occurred that damaged certain units and other areas at the Woodbridge Apartments, located at 6635 N. 19th Ave. in Phoenix, Arizona. J.K. Residential either owns or manages the Woodbridge Apartments. Complainant entered into a contract with J.K. Residential either to act as the general contractor or owner’s agent on the project to repair and restore the Woodbridge Apartments. Because Complainant is not licensed in Arizona, it contracted with Respondent for the restoration work. On or about May 12, 2014, both parties’ representatives signed a contract on Respondent’s letterhead that provided that Respondent would perform the following scope of work: Total Fire Restoration 1) Bedroom Apt # 287 & 288 2) Bedroom Apt # 103, 104, 121, 122 Minor Repair Cosmetics Only Apt # 123, 124, 286[3]

The total price of the work was $94,000.00. The May 12, 2014 contract provided the following payment schedule: - Upon Signing Of Contract: $10,000 - Rough Inspection: $15,000 - Drywall Hanging (ready to paint): $15,000 - Cabinets & Fixtures Install: $25,000 - Painting & Etc.: $10,000 - Completing and Final Inspection: $10,000 - Property Owner Inspection (Final): $9,000[4]

The deadline for completion under the May 12, 2014 contract was eight weeks. On or about July 14, 2014, Complainant signed another proposal that Respondent had prepared on its letterhead to perform additional fire restoration in the main office and lobby of the Woodbridge Apartments for an additional price of $29,000.00. The July 14, 2014 contract did not include additional payment terms or a date of completion.[5] Between May 15, 2014, and November 12, 2014, Complainant paid Respondent either $123,000.00 or $123,200.00.[6] Mr. Chi testified that Complainant had paid Respondent all but $3,000.00 of the $9,000.00 retention amount. Mr. Arroyos agreed that Complainant only owed Respondent $3,000.00 or $4,000.00. The apparent discrepancy between Complainant’s payments and Respondent’s contract prices was not explained in the record and was not an issue at the hearing. In the meantime, a pipe in the slab under Apt. 123 burst, causing substantial additional collateral damage to that unit. On or about June 30, 2014, Respondent submitted a Change Order to Complainant, stating that “Apt 123 is not a minor repair Cosmetics by contract dated 5/12/14” and proposing substantial additional repairs for an additional price of $9,000.00.[7] The Change Order did not provide any additional payment terms or date of completion. Complainant did not accept the Change Order. On or about September 22, 2014, Respondent submitted a Change Order to the owner of the Woodbridge Apartments to perform a complete restoration of Apt. 123 for a price of $6,500.00 that was similar to the June 30, 2014 Change Order that Complainant had rejected. On or about October 2, 2014, a representative of the Woodbridge Apartments signed the September 22, 2014 Change Order.[8] Mr. Chi testified that it was not a smart move for Respondent to contract directly with the owner of the Woodbridge Apartments to perform repairs to Apt. 123 because the payment terms of the May 12, 2014 contract made Respondent responsible for setting up the final inspection and obtaining the property owner’s approval. Mr. Arroyos testified that Respondent had no control over whether the owner of Woodbridge Apartments paid Complainant because Respondent was not a party to the contract between Complainant and J.K. Residential. Mr. Arroyos testified that Complainant owed a responsibility to the owner to obtain a final inspection and the owner’s final approval of repairs that Complainant had overseen on the project. Mr. Chi acknowledged that Respondent had performed all the work required by the May 12, 2014 and July 14, 2014 contracts. Mr. Chi testified that due to the delay caused by Respondent’s work in restoring Apt. 123, J.K. Residential had kicked Complainant off the project and refused to pay the amounts still owed to Complainant. Mr. Arroyos testified that after the water line broke in Apt. 123, restoration involved much more than a cosmetic repair. Mr. Arroyos testified that after Respondent completed the repairs required by the May 12, 2014 and July 14, 2014 contracts, he called the City of Phoenix Planning and Development Department for an inspection. Respondent submitted the July 25, 2014 Inspector’s Notice that stated that “Buildings – G, N, F, units complete. Electric clearance will be issued when Permits for unsafe stairs are complete.”[9] Respondent submitted photographs of the damage to the slab in Apt. 123 and of exterior stairways missing treads.[10] Mr. Arroyos pointed out that Respondent did not contract to repair exterior stairways. Mr. Arroyos testified that although Respondent’s restoration of Apt. 123 was 97% complete, Woodbridge Apartments had not paid Respondent for the job. Mr. Arroyos explained that when Respondent was completing the job, Woodbridge Apartment’s manager instructed him to leave the job because J.K. Residential was getting sued and it did not want any of Complainant’s representatives on the property. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[11] Complainant bears the burden of proof to establish Respondent’s statutory violation 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] It appears that Respondent got caught in Complainant’s dispute with J.K. Properties and/or Woodbridge Apartments. In any event, Complainant did not establish that Respondent’s contracts with Complainant either (1) prohibited Respondent from contracting directly with the owner of the Woodbridge Apartments for additional work, or (2) required Respondent to get J.K. Residential to approve Respondent’s work under its contracts with Complainant as a condition of getting paid by Complainant. Therefore, Complainant did not establish that Respondent violated A.R.S. § 32- 1154(A)(1) by abandoning the job. / / / / RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Complainant Averland Construction Inc.’s complaint against Brothers Construction LLC’s License Nos. KB-1.290390-D and CR11.256872-D shall 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 five days from the date of that certification. Done this day, December 16, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] A.R.S. § 32-1154(A)(1) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]bandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.” [2] Investigator Grimm testified that the original Investigator assigned to the complaint, Kyle Pinch, had left state service. Investigator Grimm testified that the Registrar had not performed a jobsite inspection or issued a Directive in this case. Investigator Grimm testified that after the manager of the apartment complex, Maria England, informed Investigator Pinch that work to complete the job was being performed by another contractor, the case was forwarded to the Registrar’s Legal Department. [3] Complainant’s Exhibit 1 at 1. [4] Id. at 2. [5] See Complainant’s Exhibit 2. [6] The complaint alleged that Complainant had paid Respondent $123,200.00 of the $126,000.00 owed. An email that Complainant submitted stated that Respondent had been paid a total of $123,000.00. See Complainant’s Exhibit at 3. [7] Complainant’s Exhibit 3. [8] See Complainant’s Exhibit 4. [9] Respondent’s Exhibit A. [10] See Respondent’s Exhibit B. [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).

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