ALJDEC decisions subject to certification as final
2017A-4339-NPC-ROC · Registrar of Contractors · 2018-01-09
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
All About Stucco and Stone LLC,
COMPLAINANT,
v.
J R A General Contracting LLC ,
License No. B-1.217532-C,
RESPONDENT.
No. 2017A-4339-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: December 28, 2017, at 1:00 p.m.
APPEARANCES: All About Stucco and Stone LLC (“Complainant”) appeared through Michael Swartz, its Manager of Business Development; J R A General Contracting LLC (“Respondent”) was represented by John T. Gilbert, Esq., Radix Law, PLC.
ADMINISTRATIVE LAW JUDGE: Diane Mihalsky
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
On or about March 22, 2006, the Arizona Registrar of Contractors (“the Registrar”) issued License No. B-1.217532-C for commercial general contracting to Respondent.
On or about July 24, 2008, the Registrar issued License No. CR36.247194-D for dual plastering to Complainant.
On or about August 23, 2017, Complainant filed a complaint with the Registrar alleging that Respondent owed Complainant $42,780.00 in principal for stucco work that Complainant had performed on Building 7 at a commercial project located at 1410 W. Elliott Rd., Gilbert, Arizona.
On September 15, 2017, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent’s license.
Respondent’s attorney filed a timely written answer to the Citation, acknowledging that Complainant had performed work on the project, but affirmatively alleging that no money was owed because Complainant had not completed the project and could not complete the project because its qualifying party had passed away. Respondent also stated that the owner of the project had stopped all work on Building 7 and had not paid Respondent for Complainant’s work.
Neither Respondent’s September 7, 2017 initial response to the complaint nor Respondent’s attorney’s September 28, 2017 written answer to the Citation alleged that Complainant’s workmanship in applying the stucco or the materials that Complainant used on Building 7 were deficient in any respect. Respondent also did not allege that Complainant misstated the amount of the parties’ contract.
The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.
A hearing was held on December 28, 2017. Complainant submitted 22 exhibits and presented the testimony of its Manager of Business Development, Michael Schwartz, and its current qualifying party/member, Vicki Martin, who was the wife of former qualifying party/ member, Ronnie Martin. Respondent submitted 10 exhibits and presented the testimony of its qualifying party/employee, Clarence Goodlett.
Additional Hearing Evidence
Respondent was the general contractor under a cost-plus contract with property owner Gilbert Dinero to construct a number of commercial buildings at 1410 W. Elliott Rd. Mr. Goodlett testified that the terms of Respondent’s contract with Gilbert Dinero provided that Respondent would be paid the cost of its subcontractors’ subcontracts, plus 10% for Respondent’s profit and overhead. Respondent did not submit its contract with Gilbert Dinero. Mr. Goodlett testified that he acted as project superintendent and was the only employee of Respondent on site.
Mr. Goodlett testified that the project was performed in two stages. Respondent constructed Buildings 1, 2, and 3 in the first stage. Complainant was not the stucco and stone contractor for the first stage.
Mr. Goodlett testified that the second stage of the project was the construction of Buildings 4, 5, 6, and 7.
Mr. Goodlett testified that the stucco contractor for the first stage of the project charged a high price and that when he met Ronnie Martin, Respondent’s former qualifying party/member, Mr. Goodlett thought “this is my guy” because Mr. Martin was willing to negotiate with Respondent and willing to honor agreements that were based on a handshake.
On or about July 1, 2016, Complainant submitted a Proposal-Contract to Respondent to perform the stucco and stone on Buildings 4, 5, and 7, for the following amounts:
Building
Stucco Price
Stone Price
Building #4
$29,800.00
$ 8,240.00
Building #5
$35,650.00
$ 7,200.00
Building #7
$71,300.00
$14,400.00
At some point, at Mr. Goodlett’s request, Mr. Martin revised Complainant’s Proposal-Contract to reduce Complainant’s price to apply stucco to Building #4 by $1,800.00, and to reduce Complainant’s price to apply stucco to Building #5 by $2,200.00, for the following revised totals:
Building
Stucco Price
Stone Price
Building #4
$28,000.00
$ 8,240.00
Building #5
$33,450.00
$ 7,200.00
Building #7
$71,300.00
$14,400.00
The parties did not agree to change the prices for Building 7 at that time.
On or about July 8, 2016, Mr. Goodlett sent an email to Mr. Martin, stating that “the bids look fine you have a written approval for your proposal I will forward your contract next Friday when I am back in town.” Respondent did not sign the original or revised Proposal-Contract.
On or about July 17, 2016, Respondent drafted a Subcontract Agreement based on Complainant’s July 1, 2016 Proposal-Contract for Complainant to apply stucco and stone to Building 5 for a total price of $33,450.00. Mr. Martin signed the Subcontract Agreement.
Mr. Goodlett testified that Mr. Martin had also signed a similar agreement for Building 4, but the agreement was in Gilbert Dinero’s file.
By September 23, 2016, Complainant completed application of stucco and stone to Building 5. Complainant issued an invoice in the amount of $16,725.00 for the first half of the stucco, an invoice in the amount of $20,325.00 for the second half of the stucco and half of the stone, and invoice in the amount of $3,600.00 for the second half of the stone. Respondent made two payments in the amount of $16,725.00 for the stucco and one payment in the amount of $7,200.00 for the stone.
Mr. Goodlett testified that Respondent realized that the Subcontractor Agreement that Mr. Martin had signed for Building 5 contained an error because it did not include the cost of the stone that Complainant had installed, as shown on the revised Proposal-Contract. Mr. Goodlett testified that because Respondent did not want to take advantage of Complainant, Respondent paid the full amount for the stucco and stone shown on the revised Proposal-Contract.
By November 15, 2016, Complainant completed application of stucco and stone to Building 4. Complainant issued two invoices in the amount of $14,000.00 each for the stucco and one invoice in the amount of $8,240.00 for the stone. On November 1, 2016, Respondent paid Complainant $14,000.00 for the first stucco invoice and on November 15, 2016, Respondent paid Complainant $22,240.00 for the second stucco invoice and the stone invoice for Building 4.
Mrs. Martin testified that although stucco is manufactured to include color, such stucco is more expensive. Complainant only subcontracted to apply Western One-Coat stucco, which is not colored, to Buildings 4, 5, and 7. Respondent’s subcontractor applied paint or primer to the Western One-Coat stucco that Complainant had applied to Buildings 4 and 5.
By April 20, 2017, Complainant had completed application of stucco to Building 7. At some point, Gilbert Dinero asked Respondent to stop working on Building 7.
Complainant did not install the stone on Building 7. Respondent’s subcontractor did not primer or paint the Western One-Coat stucco that Complainant had applied to Building 7.
On April 21, 2017, Mr. Martin sent an email to Mr. Goodlett at Respondent to which he attached Complainant’s invoice to Respondent in the amount of $71,300.00 for the application of stucco and $14,400.00 for the installation of stone at Building 7.
Respondent did not respond to Complainant’s April 21, 2017 invoice. Mr. Goodlett testified that he was not able to open the attachment to the April 21, 2017 email, but that if he had opened the attachment, he would have lodged a protest with Complainant.
On June 7, 2017, Mr. Martin sent another email to Mr. Goodlett at Respondent, to which he attached an invoice for interest on the cost of materials that Complainant had used on Building 7 and an invoice for $57,180.00 for the remaining balance owed for Building 7. The invoice for the balance showed that on June 2, 2017, Respondent had paid Complainant $28,520.00 for 40% of the cost of stucco on Building 7.
Although Mr. Goodlett acknowledged that he had seen the June 7, 2017 invoice, Respondent did not respond to Complainant’s June 7, 2017 invoice.
On July 6, 2017, Mr. Martin passed away.
Mr. Goodlett testified Respondent never agreed to Complainant’s Proposal-Contract for Building 7. Instead, Mr. Goodlett testified that Mr. Martin had orally agreed that Respondent would apply the stucco and install the stone on Building 7 for the price of just the stucco on the Proposal-Contract, $71,300.00. Mr. Goodlett testified that Mr. Martin had asked for 40% down to begin the job. Mr. Goodlett testified that the agreement was never reduced to writing because Mr. Martin was in a hurry.
Mrs. Martin testified that her husband never told her that he had agreed to any discount from the amount of the Proposal-Contract for applying the stucco or stone to Building 7. Mrs. Martin testified that the first she heard of the alleged discount was during Mr. Goodlett’s testimony.
On July 11, 2017, Mrs. Martin texted Mr. Goodlett, asking if funds had been released by Gilbert Dinero for Complainant’s invoice for stucco on Building 7. On August 3, 2017, Mr. Goodlett responded, “Yes the people holding the money on bldg. #5 are releasing the money today or tomorrow I just got confirmation yesterday and my money should be here sometime next week.”
On July 12, 2017, Mrs. Martin sent an email to Mr. Goodlett, to which she attached Complainant’s revised invoice on which charge for the stone for Building 7 had been removed. Mrs. Martin explained that Mr. Martin had asked her to include the stone in the invoice so that Respondent could bill Gilbert Dinero and Respondent would have money to pay Complainant to complete the stone on Building 7. Mrs. Martin stated that Complainant was ready to install the stone whenever Respondent wanted.
On July 12, 2017, Mrs. Martin sent an email to Mr. Goodlett, to which she attached Complainant’s invoice for the $71,300.00 cost of the stucco, less Respondent’s $28,520.00 payment.
On November 9, 2017, Respondent’s attorney sent an email to Complainant, stating that the stucco that Complainant applied to Building 7 required repair and that Respondent was entitled to deduct the following amounts from what otherwise might be owed to Complainant:
Stone $10,310.52
Concrete surrounds $ 6,225.00
Stucco repair $ 2,500.00
Supervision $ 1,800.00
Administration $ 1,000.00
Clean up on site $ 1,200.00
Total $23,035.52
Mrs. Martin testified that the November 9, 2017 email was the first time Respondent ever informed her that there was a problem with Complainant’s work on Building 7.
Respondent submitted a letter dated November 3, 2017, from Barbara Hasse, the owner of B&J Glass, License No. ROC195161, stating that it was “obvious” that the glass and window frames had not been protected when stucco was applied to Building 7 and that it would cost $7,000.00 to clean the stucco off the window frames and glass or $46,150.00 to replace the window frames and glass.
Mr. Goodlett testified that the streaks on the stucco resulted from the alkaline content in the Western One-Coat stucco. Mr. Goodlett testified that if the stucco is sealed too early without wetting down and not brought to the right pH level, streaks would occur.
Complainant submitted a letter from its stucco supplier, Henry Products, dated November 30, 2017, that stated its representative had inspected the job and there were only a few limited areas that had stucco on the window frames. The letter stated that the main cause of the poor appearance of the stucco was that Building 7 had sat many months without paint, causing the efflorescence that had been washed onto the window frames and glass by storms. The supplier attached a technical bulletin that explained the causes of efflorescence in stucco.
Complainant also submitted a letter from Richard Arguijo of stucco contractor Royal Wall Systems LLC, stating that he had walked the project and had seen no damage to window frames. According to Mr. Aguijo, the damage to the frames had been caused by Respondent’s failure to paint the stucco, which resulted in efflorescence.
Mr. Goodlett testified that he has not been able to work on any projects for Respondent but the one on Elliott Rd pursuant to the cost-plus contract with Gilbert Dinero. Mr. Goodlett testified Respondent has only made $160,000.00 over the three years that he has been working on the project. Mr. Goodlett testified that he expected that Respondent would make at least $300,000.00 on the project because he estimated that it would cost $3 million to build.
Respondent submitted its bank statements for its checking account for June 2017, July 2017, August 2017, September 2017, and November 2017, which showed an ending balance of $244.99 at the end of November 2017. Mr. Goodlett testified that as of the date of the hearing, Respondent had only $3.97 in its checking account and $107.00 in savings. Mr. Goodlett testified that Respondent was not able to pay Complainant.
Respondent did not submit any evidence of its billings to Gilbert Dinero or Gilbert Dinero’s payments to Respondent. Mr. Goodlett testified Respondent turned over deposits for receipts and subcontractors’ invoices to Gilbert Dinero.
Complainant also submitted Respondent’s bank statements for its checking account for June 2017, July 2017, and August 2017. The statements showed that on July 14, 2017, Respondent had made a deposit in the amount of $45,246.85 and that on July 24, 2017, Respondent had made a deposit in the amount of $122,000.00 into its checking account.
Mr. Goodlett testified that Respondent had to pay other subcontractors on the project with the proceeds of these deposits. Mr. Goodlett testified that Respondent had submitted an invoice for the $28,500.00 that it had paid Complainant for Building 7, but that Gilbert Dinero refused to pay any more for Building 7 because it did not have stone on it.
Mr. Goodlett testified that the project has been on hold since July 2017, and that Gilbert Dinero has instructed Respondent to proceed on January 8, 2018. Mr. Goodlett testified that Respondent has not received any money from Gilbert Dinero to continue the project.
According to the Registrar’s public website, on October 23, 2017, Complainant’s license was suspended for lack of a qualifying party but on November 27, 2017, the license was reinstated when Mrs. Martin qualified as Respondent’s qualifying party.
Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s disciplinary history on the Registrar’s public website on this date. Respondent’s license was on probationary status between September 27, 2013 and September 27, 2014, and between September 22, 2011 and March 20, 2012. Respondent’s license was under finite suspensions between August 28, 2013 and September 26, 2013, between August 15, 2012 and August 29, 2012, and between September 14, 2011 and September 21, 2011. As of this date, Respondent’s license was current and in good standing.
CONCLUSIONS OF LAW
This dispute lies within the Registrar’s jurisdiction to resolve.
Complainant bears the burden of proof to establish cause to suspend or revoke Respondent’s contractor’s licenses by a preponderance of the evidence. Respondent bears the burden of proof to establish affirmative defenses by the same evidentiary standard.
“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”
A.R.S. § 32-1154(A)(10) includes among the grounds for suspension or revocation of 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.
Under the statute, poor workmanship, lack of capacity to pay, and non-payment by the owner are affirmative defenses that Respondent bears the burden to establish.
Respondent acknowledged that it had agreed that Complainant would apply the stucco to Building 7 and that Complainant had applied stucco to Building 7. Under the plain language of the statute, however, Complainant is only entitled to recover the cost of materials or services, not interest or penalties.
Mr. Goodlett’s testimony that before Mr. Martin died, he orally agreed that Complainant would only charge Respondent the amount on the Proposal-Contract to apply stucco for both applying stucco and installing stone on Building 7 was not credible. First, neither Mr. Goodlett nor Respondent’s attorney referred to this alleged oral agreement in any of the correspondence that was sent in response to Complainant’s invoices, the initial response to the complaint, the written answer to the Citation, or Respondent’s attorney’s November 9, 2017 email to Complainant, which apparently was sent in anticipation of the hearing. Second, reducing the combined amounts of Complainant’s bid to install stucco and stone on Building 7 by the bid amount to install stone would result in a substantial discount of 20.2%. In contrast, the reduction in the cost to apply stucco to Building 4 only resulted in a 4.7% discount and the reduction in the cost to apply stucco to Building 5 only resulted in a 5.1% discount. Mrs. Martin credibly testified that she had never heard about the substantial discount for Building 7 until Mr. Goodlett testified at the hearing. Third, the parties’ course of dealings with respect to Buildings 4 and 5 was that Complainant invoiced and Respondent paid for the stucco and stone separately, in accordance with the terms of the Proposal-Contract, not as combined projects, and Complainant never reduced the price of the stone. Therefore, Complainant established that the contract price for applying stucco to Building 7 was the price on the Proposal-Contract, $71,300.00.
Mr. Goodlett’s testimony that the streaks on the windows and window frames resulted from alkaline pH factor caused by Complainant’s failure to water or seal the stucco on Building 7 also was not credible. First, this alleged defect was not called to Complainant’s attention until Respondent’s attorney’s November 9, 2017 email to Complainant. Second, Complainant only contracted to install stucco on Building 7, not to seal or paint it. Third, both Royal Wall Systems LLC and Henry Products submitted letters stating that the cause of the efflorescence on Building 7 was Respondent’s failure to paint or seal it for at least seven months. Although these statements are hearsay, hearsay may be admitted in an administrative hearing and may be relied upon if it is the kind of evidence that reasonable persons would rely upon in serious matters. In light of Mr. Goodlett’s failure to establish any particular expertise in the cause of efflorescence in stucco, under the totality of the circumstances, Royal Wall Systems LLC’s and Henry Products’ hearsay statements that Complainant did not cause the efflorescence are reliable.
Under the plain language of A.R.S. § 32-1154(A)(10), Respondent’s failure to earn the profit that it hoped to make on the job is not a defense to failure to pay Complainant. Mr. Goodlett testified that he expected Gilbert Dinero’s project on W. Elliott Rd. to cost a minimum of $3 million. Yet Respondent did not submit its pay applications to Gilbert Dinero based on its subcontractors’ performance of subcontracts to work on the project and did not submit any records of Gilbert Dinero’s payments on the project based on the pay applications. Presumably, Respondent followed the sound business practice of keeping copies of these documents to use to resolve any dispute with Gilbert Dinero. The record does not contain any explanation of why in early June 2017, Gilbert Dinero paid $28,520.00 for the stucco work that Complainant had completed on Building 7 at the latest by April 21, 2017. The lack of stone on the building does not explain or legally justify non-payment because it was Gilbert Dinero’s decision to stop work on Building 7. From April 21 through July 6, 2017, Mr. Martin was still alive and Respondent would still have been able to complete its subcontract to install stone on Building 7 if Gilbert Dinero and Respondent had wanted it to complete its subcontract. Although Mr. Goodlett’s testimony may be sufficient to establish that Respondent currently is unable to pay Complainant, the record contains no explanation for its inability. Respondent failed to establish that Gilbert Dinero failed to pay Respondent for any portion of Complainant’s work in installing stucco to Building 7.
Therefore, Complainant established cause to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(10) based on its failure to pay Complainant a total of $42,780.00 for applying stucco to Building 7.
RECOMMENDED ORDER
Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Respondent J R A General Contracting LLC.’s License No. B-1.217532-C shall be suspended until Respondent pays Complainant All About Stucco and Stone LLC $42,780.00.
It is further recommended that if on or before the effective date of the order, the Registrar receives satisfactory written proof from Respondent that it has paid $42,780.00 to Complainant by cashier’s or certified check, the Registrar should not suspend Respondent’s license but, instead, should close the complaint in Case No. 2017-4339.
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.
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Done this day, January 9, 2018.
/s/ Diane Mihalsky
Administrative Law Judge
Transmitted electronically to:
Jeffrey Fleetham, Director
Registrar of Contractors