ROC Vacate

2016A-3624-ROC · Registrar of Contractors · 2017-01-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

A hearing on the merits had been scheduled on this date on Sun Country Floors’ (“Complainant’s”) claim that Marathon Resources Inc. (“Respondent”) had violated A.R.S. § 32-1154(A)(10). Complainant’s qualifying party/officer Robert Seiter acknowledged that because the owner of the project had paid Complainant, it had not suffered any out-of-pocket loss for Respondent’s alleged failure to pay. Mr. Seiter stated that because he believed that the owner had paid Respondent for Complainant’s work but that Respondent had failed to pay Complainant using those proceeds, a violation had occurred and that Respondent’s unethical business practices warranted discipline. Respondent’s attorney disputed whether the owner had paid Respondent for Complainant’s work. The owner’s attorney and representative attended the hearing on Complainant’s claim. It appears that litigation is contemplated or pending between the owner and Respondent over at least some of the same issues that Complainant wishes to raise in this matter. A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license the following: Failure 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.

A subcontractor’s claim for a violation of A.R.S. § 32-1154(A)(10) is essentially a claim for compensation. A claim that it lacks the capacity to pay and that the owner has not paid the general contractor for the subcontractor’s work is an affirmative defense to a subcontractor’s claim for a violation of A.R.S. § 32-1154(A)(10) that the general contractor bears the burden to prove. If a subcontractor establishes cause to suspend or revoke the general contractor’s license under A.R.S. § 32-1154(A)(10), the Registrar of Contractors’ (“the Registrar’s”) usual practice is to suspend the general contractor’s license until it has paid the subcontractor the amount that the subcontractor established to be owed. If Complainant establishes that Respondent technically violated A.R.S. § 32-1154(A)(10), since Complainant is no longer owed any money, it is not clear what remedy would be available to him in this forum.[1] Although the Registrar encourages professionalism and high business ethics in the construction profession, since A.R.S. § 32- 1154(A) does not include poor business ethics, without more, as grounds to suspend or revoke a contractor’s license, this goal is primarily aspirational and without damages, Respondent’s allegedly poor business ethics alone would not confer standing on Complainant to prosecute this complaint. Mr. Seiter acknowledged that Complainant has not been damaged by Respondent’s possible violation of A.R.S. § 32-1154(A)(10). If anyone has been damaged by Respondent’s possible violation of A.R.S. § 32-1154(A)(10), it is the owner, which is not a party to this proceeding and cannot be joined. The owner is in a better position to prosecute a claim for nonpayment against Respondent and can present Mr. Seiter’s analysis, evidence, and testimony in its case against Respondent in a judicial forum. Under the circumstances, the Registrar should defer to a court of competent civil jurisdiction to determine whether Respondent failed to pay Complainant monies due after being paid for the work by the owner in the owner’s lawsuit.[2] Therefore, IT IS ORDERED vacating the remainder of the hearing on the merits that had been scheduled on January 10, 2017, in the Office of Administrative Hearings. IT IS FURTHER ORDERED remanding this matter under A.A.C. R2-19-111(4) to the Director of the Arizona Registrar of Contractors for further action. Done this day, January 11, 2017.

/s/ Diane Mihalsky Administrative Law Judge

Copy mailed/e-mailed/faxed January 10, 2017 to:

Jeffrey Fleetham, Director Registrar of Contractors c/o Legal Department 1700 W. Washington Street, Suite 105 Phoenix, AZ 85007

Robert Seiter Sun Country Floors Inc. 1743 S. Horne #200 Mesa, Arizona 85204

Ivy L. Kushner, Esq. 4325 N. 75th St., Ste. 103 Scottsdale, AZ 85251-3543

Richard G. Erickson, Esq. Snell & Wilmer LLP 400 E. Van Buren St. Ste. 1900 Phoenix, AZ 85004-2509

By M. Johnson

----------------------- [1] See, e.g., Hamilton v. Nakai, 453 F.2d 152 (9th Cir.), cert. denied, 92 S. Ct. 2044, 406 U.S. 945, 32 L. Ed. 2d 332. [2] See, e.g., Coonley & Coonley v. Turck, 173 Ariz. 527, 844 P.2d 1177 (App. 1993).

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