ALJDEC decisions subject to certification as final

2017A-5086-NPC-ROC · Registrar of Contractors · 2018-02-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Building Corporation,

COMPLAINANT,

v.

Richard Steven Connelly dba,

R S C Mechanical Co ,

License No: 256916

RESPONDENT.

No. 2017A-5086-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 17, 2018, at 10:00 a.m.

APPEARANCES: Patrick Lannan (“Mr. Lannan” representative for Building Corporation “Complainant”); Kelly Lannan (“Kelly Lannan” witness for Complainant); Richard S. Connelly (“Mr. Connelly” representative for Richard Steven Connelly dba, R S C Mechanical Co. “Respondent”); and Charles Connelly (“Charles Connelly” witness for Respondent).

ADMINISTRATIVE LAW JUDGE: Linda Marie Brown

_____________________________________________________________________

FINDINGS OF FACT

Richard Steven Connelly dba R S C Mechanical Co. (“Respondent”) was issued License No. CR39-256916-D on July 13, 2009, from the Registrar of Contractors (“Registrar” or “ROC”) for air conditioning and refrigeration. Richard Steven Connelly is the Qualifying Party/Owner. According to the Registrar’s public website, the Respondent has no prior complaints against it.

The Registrar issued Building Corporation (“Complainant”) License No. 219968, on May 16, 2006, for a B General Residential Contractor. Farrell Orville Williams is named as the Qualifying Party, and John Patrick Lannan is named as an officer.

On or about October 6, 2017, Complainant filed its complaint with the Registrar against the Respondent alleging Supplier Lien. In its description of the issue, it wrote, “Building Corp. paid RSC for work in progress. RSC did not pay supplier. Suppler has lien the building. RSC refuses to pay the supplier.” Complainant alleges it paid $99,508.48 of the $121,679.00 contract amount to Respondent.

On October 16, 2017, the Registrar sent notice of the complaint to the parties at the address of record.

The Registrar issued a Citation on October 30, 2017, for Alleged Violation of A.R.S. § 32-1154(A)(10).

Respondent filed a timely written answer to the Citation and Complaint on November 11, 2017, counterclaiming that Complainant owes it $24,399.00 for the remainder of the Contract, and that any lien filed by a supplier was to protect both Respondent and supplier. Respondent denied any statutory violation, and further replied that Complainant marked “residential” on its complaint, when the project was “commercial”.

A request for a state fair hearing was submitted and an evidentiary hearing was scheduled and held at the Office of Administrative Hearings (“OAH”), an independent state agency.

At hearing, both Complainant and Respondent were present. Complainants Exhibits A through D, as attached to its Disclosure Statement received on January 12, 2018, were admitted. Upon conclusion of the hearing, Complainant was provided an additional day to submit its copy of a proposal that purported to set forth warranty terms but this document was never received and is now deemed not offered.

Complainant entered as Exhibit A-2, a copy of Notice and Claim of Lien (“Lien”) filed with the Maricopa County Recorder’s office against the Project Name and Address set forth in the parties Agreement.

The Agreement was entered into between the parties on May 25, 2016, for a contract price of $121,679.00. Article 2 set forth, “Contractor shall hold retention equal to 10% of the contract till final acceptance of the City of Scottsdale”. At hearing, Complainant did not offer any evidence that the project failed inspection, or no certificate of occupancy was not obtained.

The Lien field on or about April 28, 2017, by Hercules Industries, Inc. named the property owner as Macallister Apartments LLC, and stated that it furnished materials to RSC Mechanical, 1654 E Florence Blvd #4-104, Casa Grande, AZ 85122. The time of commencement of the furnishing of materials noted was 05/31/2016, and date of completion was 04/06/2017. The lienor’s demand, after deducting all just credits and offsets is the sum of $31,590.88. This amount appears to be $7,191.88 greater than what Respondent purported is owed it in its written response to the Citation and Complaint. Testimony was received by Complainant that the outstanding amount is slightly lower than what is listed on the lien.

Complainant offered in its initial complaint a Release and Waiver signed on or about October 28, 2017, by Respondent who acknowledges receipt of $40,680.00 as a progress payment from Complainant and attests by its signing that all suppliers have been paid.

Complainant argued that the Agreement states under “Article 3 Payment Schedule, section (f) the final payment hereunder shall not be due until the Subcontractor has delivered to contractor release of all claims and liens in form and text satisfactory to Contractor and/or lending institutions performing services on this project . . ..“

Respondent offered no evidence that the Lien was paid and released in support of its claim that it is owed money. Complainant also did not provide any evidence that it paid monies to release the lien and is therefore entitled to restitution as found under A.R.S. § 32-1156.01.

Both parties asserted workmanship concerns in that Complainant argued wiring incorrectly, the wiring was backwards so that the heating was not properly operating within to the HVAC and that the installation and parts were under warranty for one (1) year. Respondent testified that it never received notice that corrective action was needed and that when it did it promptly responded.

Under the Agreement, Article 11 Guarantee, “subcontractor hereby guarantees material and Workmanship for a period of one year from the date of issuance of the certificate of occupancy or filing of notice of completion, whichever is later, on each individual unit, and agrees to correct any defects and perform any servicing which may be necessary during said period.”

Complainant provided several emails exchanged between employees or members. In one set of communications exchanged on December 22, 2017, from William Farrell to Respondent, Mr. Farrell wrote “just thought you should know we are having service calls in almost in every occupied unit because the heat is not working . . . and that there have been parts that have been ordered and replaced.” Respondent replied, apparently on the same day, that “we should have been notified first about the no heat calls. Having someone work on first year warranty units can legally void our first year warrant according to the ROC.”

Under Article 4 Attorney Fees, Costs and Expenses, of the parties Agreement, it states a “A ‘contract action’ means any civil action (i) for breach of this Contract, to enforce a performance under this Contract, to enforce a remedy under this Contract, or to enforce any statutory lien rights, and (ii) . . ..” Therefore, lending remedies to a civil forum.

Complainant is demanding that Respondent be disciplined and further asserts that under Article 7 and 8 of its Agreement, it should be able to access Respondent’s Bond for harm caused for Respondent’s alleged non-payment to supplier.

Respondent argues that Complainant should be required to pay the remaining balance it is owed, and that once it has the funds it is entitled, it will obtain a Release of Lien from Hercules Industries, Inc..

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 license by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

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 . . . 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 A.R.S. § 32-1154(A)(10), after a hearing pursuant to this article, an administrative law judge may recommend that a licensee provide restitution to any person who is injured or whose property is damaged by an action of the licensee.

Complainant did not establish that Respondent owes it money because it provided no proof that Complainant paid to Hercules Industries, Inc. the lien amount to obtain a Release of Lien filed against the project.

This Tribunal also finds that by Complainant’s own admission in its complaint, there appears to be an outstanding balance due Respondent under the Agreement of $22,170.52. However, Respondent failed to prove in its defense that it is due money since it stated in its signed Waiver of October 28, 2017, that there were no existing liens, in light of the fact a lien was filed in Maricopa County on or about April 28, 2017. For this reason, the Tribunal finds Complainant is exercising its right to withhold payment as set forth under Article 3, Section (f) of the Agreement. However, this does not entitle Complainant rights to assert additional payments as reimbursement since it provided no proof that it itself paid monies directly to Hercules Industries, Inc., to obtain a Release of Lien.

This Tribunal also finds that no evidence was presented to dispute that the project did not obtain a certificate of occupancy as agreed, and that the only basis to Complainant withholding payment from Respondent is found under Article 3, Section (f) of the Agreement.

Should Respondent pay and obtain a Release of Lien from Hercules Industries, Inc., while continuing to honor its Guarantee, it may have remedies to the remaining balance as set forth in the Agreement. However, that issue is not a part of this proceeding.

This Tribunal finds that the purpose of this hearing was a non-payment as defined under A.R.S. § 32-1154(10), and that any arguments surrounding breach of contract issues would be best heard in a court of competent jurisdiction.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Case No. 2017-5086 against Respondent R S C Mechanical Co., License No. CR39.256916-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 forty days from the date of that certification.

Done this day, February 9, 2018.

s/ Linda Marie Brown

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors