ALJDEC decisions subject to certification as final

2017A-5047-NPC-ROC · Registrar of Contractors · 2018-03-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arizona Verde Fire Protection Inc,

COMPLAINANT,

v.

Red Mountain Metals & Fire Inc,

License No: 305015

RESPONDENT.

No. 2017A-5047-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 12, 2018, 8:30 A.M.

APPEARANCES: Edward Rubacha, Esq., on behalf of Complainant; Kevin Harper, Esq., on behalf of Respondent

ADMINISTRATIVE LAW JUDGE: Roger A. Geddes

_____________________________________________________________________

FINDINGS OF FACT

1. Red Mountain Metals & Fire, Inc., (Respondent), is the holder of License Number 305015 issued by the Registrar of Contractors (Registrar).

2. On or about October 4, 2017, Arizona Verde Fire Protection, Inc. (Complainant), filed a Complaint against Respondent with the Registrar alleging that Respondent owed Complainant the sum of $38,155.78. This amount represented the total of several unpaid invoices relating to a subcontract entered into between Respondent and Complainant for the completion of work on a contract between Respondent and Sierra Building Systems, LLC (“Sierra Builders”), for the installation of a fire sprinkler system at the Ashley Heights Ward in Gilbert, Arizona..

3. On October 19, 2017, the Registrar then issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) for the alleged failure by Respondent to pay monies in excess of $750.00 when due for materials or services rendered in connection with Respondent’s operations as a contractor. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The Registrar issued a Notice of Hearing setting a hearing for February 12, 2018, at 8:30 A.M.

4. Wade Green, Vice President and qualifying party of Complainant, Jody Green, Corporate Secretary and part owner of Complainant, and David Green, Field Superintendent of Complainant, appeared and testified on behalf of Complainant; Penny VanDellen, owner and President of Respondent, appeared and testified on behalf of Respondent.

5. Wade Green on behalf of Complainant testified that Penny VanDellen on behalf of Respondent contacted him about providing manpower for the completion of a fire sprinkler system installation at the Ashley Heights Ward in Gilbert, Arizona. He stated that she told him that Respondent had a contract with Sierra Builders to install the system but that Respondent had lost its work crew and the job had now gotten behind schedule by two weeks. He testified that he observed that the job was 30-40% complete, that design of the system was completed, and that all materials had been delivered to the project site.

6. Mr. Green further testified that he told Ms. VanDellen that installation was typically a two man job but that Complainant would be required to supply four men immediately to bring the project back on schedule. The parties confirmed that the project would commence on March 4, 2017, with Complainant supplying four men to the project site. (Complainant’s Exhibit 1).

7. Mr. Green also testified that he did not give Ms. VanDellen an estimate to complete the work but that he told her that there were not sufficient funds left on the contract between Respondent and Sierra Builders for Complainant to complete the job. He testified that it would have taken him days to prepare an estimate, so he did not prepare one because Respondent needed Complainant to start work immediately. He testified further that he told Ms. VanDellen that Respondent would be responsible for any amounts over and above funds paid by Sierra Builders on Respondent’s contract with Sierra Builders. He stated that Respondent agreed that Complainant would do the work on a time and materials basis, the rates for which were provided to Respondent before Complainant’s work began. (Complainant’s Exhibit 2).

8. Jody Green on behalf of Complainant testified as to the invoices she sent to Respondent (Complainant’s Exhibits 4, 5, 6. 7, 10, 11, and 15), the payments received (Complainant’s Exhibits 9, 12, 13, 14), and the amount owed. She stated that she received no communications from Respondent objecting to the invoices or raising any concerns with the amounts in the invoices. She further testified that the amount of $38,155.78 was owed by Respondent (Complainant’s Exhibit 18), but that Respondent had forwarded a check in the amount of $6,199.34 (Respondent’s Exhibit 3) to Complainant that Complainant had yet to be cash. Thus, Ms. Green claimed that the difference, $31,956.44, was still unpaid by Respondent.

9. David Green on behalf of Complainant testified that his sole responsibility with respect to the project was providing manpower for the job but he was aware that the budget was tight and that Complainant was trying to complete the job for the remaining funds on the Sierra Builders contract.

10 Penny VanDellen on behalf of Respondent testified that Respondent’s contract with Sierra Builders was for the amount of $56,800 and that there was approximately $28,000 that remained unpaid to Respondent when she contacted Complainant. She further testified that she advised David Green of the amount remaining unpaid on the Sierra Builders contract and that he told her that he would be able to complete the job for that remaining amount. She stated she was “blown away” when she received the invoices from Complainant because they totaled well over the amount Sierra Builders was obligated to pay Respondent.

11. Ms. VanDellen further testified that she entered into a joint check agreement with Complainant and Sierra Builders wherein it was stated that Sierra Builders would issue joint checks to Complainant and Respondent covering goods or materials supplied by Complainant in the approximate sum of $21,499.34, an amount less than the amount remaining unpaid on the Sierra Builders contract.

12. Respondent offered into evidence an Arizona Preliminary Twenty Day Notice, dated March 13, 2017, prepared by Complainant with an estimate of the total price of labor and materials to be furnished in the amount of $25,000. (Respondent’s Exhibit 1). Complainant similarly offered into evidence a supplementary Arizona Preliminary Twenty Day Notice, dated April 19, 2017, it prepared with an estimate of the total price of labor and materials to be furnished in the amount of $50,000. (Complainant’s Exhibit 27).

13. Ms. VanDellen further testified that Respondent lacked the capacity to pay the amount Complainant contends is due. She stated that Respondent has since gone out business, has never operated at a profit, and was in the process of wrapping up its last remaining jobs when it engaged Complainant to complete the project. She stated all funds Respondent received from Sierra Builders (once Complainant started its work) had been paid to Complainant. She further testified that Respondent had no funds to pay any amount over and above funds received from Sierra Builders for the project. She also testified she was not “expecting” any funds from any other jobs

14. The only written evidence presented of Respondent’s finances consisted of seven JP Morgan Chase Bank (“Chase”) account statements reflecting transactions for the time period from March 1, 2017, through September 29, 2017. (Complainant’s Exhibits 19, 20, 21, 22, 23, 24, and 25). Ms. VanDellen testified that this account was Respondent’s only account. During that time period, the balance on the Chase account at no time exceeded the amount of $14,727.39. The account also reflects various payment of non-business expenses identified by Ms. VanDellen in the approximate amount of $5,900 for that time period. Ms. VanDellen testified that these were personal expenses that Respondent in essence paid on her behalf. However, she testified she was not paid a salary by Respondent and that this amount did not compensate her for her work for Respondent.

CONCLUSIONS OF LAW

1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154.

2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119.

3. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990).

4. 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 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.

5. To impose disciplinary action under A.R.S. § 32-1154(A)(10), there first must be a finding that Respondent failed 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. The Tribunal finds that there was such a failure on the part of Respondent.

6. The evidence reflects that Respondent did not object to any of the invoices upon receipt nor did it dispute any of the entries in the invoices. There was no evidence presented by Respondent that Complainant did not perform the work as reflected in Complainant’s invoices, or that Complainant expended an unreasonable amount of time to complete the project. While there is a sharp dispute as to whether Complainant represented it could complete the project for the amount remaining on the Sierra Builders contract, there was no evidence in any event that Complainant guaranteed that it could, or obligated itself to, complete it for that price. Rather, the evidence, the time and materials rate sheet, demonstrates that it was expressly contemplated by the parties that Complainant’s price to complete the project could go over that amount, although perhaps not to the extent it did. (Complainant’s Exhibit 2). Respondent chose to undertake that risk by engaging Complainant on a time and materials basis and by not imposing contractual limitations upon Complainant.

7. The Tribunal further finds that the evidence is insufficient to establish that Respondent lacks the capacity to pay all or part of the amount owed to Complainant. Respondent maintained that it did not have the capacity to pay any sums over and above those funds remaining unpaid under the Sierra Builders contract because Respondent was going or had gone out of business. However, Respondent offered no evidence of a dissolution or a formal winding up. Further, Respondent offered no financial statements or tax returns into evidence which would or should have shown what funds or assets Respondent may or may not have had. There was also no evidence presented regarding what capital contributions to Respondent there may or may not have been, or what obligations the shareholders may or may not have had in that regard. There was also no evidence presented concerning whether funds might have been available to Respondent through loans, or regarding any other credit options that may or may not have been available to Respondent. Further, while Respondent maintained it was not “expecting” any funds from any other jobs, it presented no evidence that it was not owed any amounts on other jobs or that Respondent did not otherwise have other accounts or notes receivables.

8. The evidence regarding the finances of Respondent was limited in large part to the Chase Bank account statements, which the evidence established was an account used as a business and personal account. However, these statements at most reflect that there was not sufficient funds in that particular account to pay Complainant’s invoices. While Ms. VanDellen testified that the Chase account was Respondent’s only bank account, there were transfers of funds out of the Chase account to another account, the owner of which Ms. VanDellen could not identify.

9. In this matter, Respondent failed to pay the amount of $31,956.44 to Complainant for materials or services rendered in connection with Respondent’s operations as a contractor when Respondent did not lack the capacity to pay. Complainant has established that Respondent’s license should be disciplined for a violation of A.R.S. § 32-1154(A)(10).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of this Order, Red Mountain Metals & Fire, Inc.’s, License Number 305015 is suspended until the Registrar receives and accepts written verification that Red Mountain Metals & Fire Inc., has paid $31,956.44 to Complainant in certified funds.

It is further recommended that if and when the Registrar receives and accepts Respondent’s evidence that it has paid Complainant $31,956.44 in certified funds, the Registrar may close the Complaint in Case No. 2017A-5047-NPC-ROC.

In the event of certification of this 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 the certification.

Done this day, March 5, 2018.

/s/ Roger Geddes

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors