ALJDEC decisions subject to certification as final

2017A-6293-NPC-ROC · Registrar of Contractors · 2018-05-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Curt Smith Carpentry LLC,

COMPLAINANT,

v.

Mackos Architecture and Construction LLC,

License No: 224228

RESPONDENT.

No. 2017A-6293-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 23, 2018 and April 20, 2018

APPEARANCES: Curt Smith, Complainant, Danni Smith, Complainant Witness,

Stephan Mackos, Respondent, Kyle Fiano, Respondent witness, Mary

McCormick, Respondent witness, Mark Hanson, Esq., Counsel for Respondent.

ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson

_____________________________________________________________________

The parties presented evidence on the issue of whether Respondent contractor Mackos Architecture and Construction LLC, License No: 224228 violated A.R.S. § 32-1154(A)(7) or (11) by failing to pay Complainant, Curt Smith Carpentry LLC, a general remodeling and repair contractor submitted invoices for framing carpentry work performed based on a bid made by the Complainant contractor.

Based on the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order to the Registrar of Contractors.

FINDINGS OF FACT

On September 14, 2016, the Registrar issued a KB-2 Dual Residence and Small Commercial License No. 132529, to Respondent Mackos Architecture and Construction LLC. [hereinafter, “Mackos”]. At all times relevant in this matter, Mackos is a licensed Arizona contractor. Stephan Makos is Mackos’ Qualifying Party.

At all times relevant in this matter Curt Smith Carpentry LLC [hereinafter, “Smith”] is a licensed Arizona contractor, License Number 281020.

On January 10, 2018, the Registrar of Contractors issued its Citation against Mackos for a violation of A.R.S. § 32-1154(A)(10) [failure to pay].

On March 23, 2018 hearing was conducted by the Office of Adminstrative Hearings, the scope of which was to determine whether there is sufficient evidence to prove Mackos violated A.R.S. § 32-1154(A)(10).

The matter was heard on March 23, 2018, witnesses sworn, testimony taken and exhibits introduced. However, at the end of Complaint’s case in chief and when Complainant rested, it was determined that additional and further hearing was necessary to gather the evidence in this case. An Order for Further Hearing was issued March 23, 2018 setting the matter for hearing on April 20, 2018. On April 20, 2018, further hearing was conducted.

Smith’s Complaint attachment states: “Curt Smith Carpentry does not have a signed contract with Mackos Architecture and Construction because Stephan Mackos never signed our estimate or our terms and conditions.” As admitted in Smith’s Complaint, and confirmed at hearing by the testimony of both Danni Smith, office manager for the Complainant and Stephan Mackos, Respondent, there is no written contract between the parties.

THE HOUSE 45 PROJECT’S INVOICES AND PAYMENTS

On April 13, 2016, Smith forwarded a proposal to Mackos in the total amount of $83,893.21 to perform framing work for Mackos on a residential home referred to as House 45. No written contract between the parties on the House 45 bid was offered into evidence.

On November 20, 2016, Smith submitted Invoice #516 to Mackos to start the project. On April 5, 2017, Mackos paid Smith $40,000.00 on invoice 516 to start the job.

On December 13, 2016, Smith Invoiced [#526] Mackos for $3,626.00 for “inbed and hardware.” On December 20, 2016, Mackos paid Smith $3,626.00 on Invoice #526.

On May 15, 2017, Smith invoiced [#555] Mackos for $20,000.00 as a framing progress payment. Mackos paid $20,000.00 to Smith on its invoice #555 on May 31, 2017.

On June 19, 2017, Smith invoiced [#560] Mackos for $10,000.00 as a framing progress payment. Mackos paid $10,000.00 to Smith on its invoice #560 on July 8, 2017.

On August 23, 2017, Smith invoiced [#573] $7,310.00 for garage framing. On August 31, 2017, Mackos paid Smith $7,310.00 on its invoice 573.

Thus, it is determined that Mackos paid Smith a total of $80,936.00 on invoicing for the House 45 project of $80,936.00 leaving a zero balance due.

Credible evidence, although disputed by Smith, was presented demonstrating that some of the framing work provided by Smith required repair, that pocket door tracks had to be removed and replaced and drywall patching was required to repair the pocket door tracks. Mackos has submitted sufficient credible evidence to demonstrate Mackos paid other contractors to repair the work provided by Smith in the amount of $13,490.00.

Smith submitted a revised estimate [#241] to Mackos on or about November 1, 2016. Mackos’ signature does not appear on the estimate signifying its approval of revisions and there is no evidence of record that indicates Mackos ever approved of or authorized the revision of the bid. The revision would have altered the total original bid of $83,893.21 to $90,109.21 – an increase of $6,216.00. Had the parties prepared and signed a written contract that set out a clear statement defining the scope of work on the House 45 project, the fact-finder may have had some basis to evaluate the enforcement of the revised estimate. Again, there is no written contract of record in this case. There is no evidence of record that Mackos authorized or approved the revised estimate.

THE HUA RESIDENCE

On or about June 29, 2016, Smith submitted a bid to Mackos to provide framing for a new residence construction referred to as the Hua Residence. The bid amount is stated as $227,310.83. Just as in the House 45 matter, no written contract between the parties on the House 45 bid was offered into evidence.

On November 20, 2016, Smith invoiced [#517] Mackos to start the job. On December 8,, 2017 Mackos paid $3,626.00 to Smith on invoice 517

On March 7, 2017, Smith invoiced [#543] Mackos $84,460.00 for framing. This amount is discounted, per the invoice, by $7,460.00, for pre-payment of lumber to lock in the lumber price. Thus, the total invoice was for $77,000.00. On April 5, 2017, Mackos paid Smith 77,000.00 for invoice #543.

On June 19, 2017, Smith invoiced [#559] Mackos $25,000.00 for start-up money. On June 30, 2-17, Mackos paid Smith $25,000.00 for invoice #559.

On July 18, 2017, Smith invoiced [#564] Mackos $30,000.00 for “framing progress payment.” On July 25, 2017, Mackos paid $30,000.00 to Smith on invoice #564.

On August 16, 2017, Smith invoiced [#571] Mackos $40,000.00 for start-up money. On August 29, 2-17, Mackos paid Smith $40,000.00 for invoice #571.

On September 21, 2017, Smith invoiced [#581] Mackos $30,000.00 for start-up money. On October 3, 2017, Mackos paid Smith $30,000.00 for invoice #581.

On October 12, 2017, Smith invoiced [#591] Mackos $17,133.51 for a progress draw. The invoice stated that the former bid #246 was increased to $231,691.83, an increase of $4,381.00. There is no evidence of record to support that this increase was authorized or approved by Mackos. Mackos paid Smith on invoice 591: $12,000.00 on November 8, 2017, $3,838.00 on November 16, 2017 and $3,988.00 on November 28, 2017, for a total of payments on invoice #591 in the amount of $19,826.00.

On October 10, 2017, Smith invoiced Mackos [#587] $7,778.20 for “Hua extra charges” for a “Truss price increase.” Mackos demanded Smith provide stamped engineer drawings which show the reason and need for the changes. It is not disputed that no engineer stamped drawings were provided to support this change and invoice. Moreover, invoice also shows finance charges for $113.25 and $114.95. There is no evidence of record demonstrating that Mackos agreed that late charges may be imposed. Mackos asserts that this invoice is not paid because it is unsupported by stamped engineer drawings.

On December 12, 2017, Smith invoiced [#599] Mackos $7,460.00. Invoice 599 states: Per Invoice #543, we gave a CASH ONLY discount. As stated on that invoice if not paid in cash, we would be adding discount back on to the original estimate. The invoice imposed a 3% processing fee. The evidence is undisputed that there is no agreement, written or otherwise, that provides Mackos payments to be made in the form in cash only or to permit Smith to impose a 3% processing fee for non-cash payments... The invoice #543 discount, Mackos contends, was given because the lumber order was pre-paid to lock in the price quoted by the lumber supplier – not for payments made in cash only. This invoice was not paid.

On November 28, 2017, Smith invoiced [#586] Mackos $12,830.00 for what is described as extras $7,550.00 of this invoice is duplicated in invoice #557 for trusses [see ¶7h hereinabove] and for the reasons stated in ¶7h hereinabove, that portion of this invoice was not paid. The remainder of the invoiced items were for items the Mackos asserted were already paid for. There was no evidence offered to support that the remainder of this invoice were for items already paid for.

On November 29, 2017 Smith invoiced [#595] Mackos $940.00 for “fur out” and steel work to adjust bearing weight of steel. This invoice has not been paid. There is no evidence of record to explain why this invoice has not been paid.

Smith admits that it walked off of the Hua job before framing was completed because, it asserted, it had not been paid on open invoices.

Mackos presented credible evidence that completion of framing on the Hua project resulted in Mackos paying other contractors for the repairs. Credible evidence, which was not contested, showed that Mackos incurred expenses directly related to Smith’s abandonment of the Hua site in order to complete the framing project {framing labor and materials] is $17,781.01.

No evidence was offered to demonstrate that Mackos lacks the capacity to pay as contemplated by A.R.S. §32-1154(A)(11).

CONCLUSIONS OF LAW

Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence. Respondent bears the burden 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.R.S. §32-1154(A)(11) 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.

Both Smith and Mackos are, at all times relevant to this matter, licensed Arizona contractors.

The framing materials and services offered by Smith to Marcos were rendered in connection with Mackos licensed operations as a contractor.

The lack of capacity to pay is an affirmative defense. No evidence was offered to demonstrate that Mackos lacks the capacity to pay as contemplated by A.R.S. §32-1154(A)(11). Therefore, Mackos has not established, by a preponderance that it lacks the ability to pay.

Smith claims in its Complaint that Mackos owes it a total of $27,340.72 in unpaid invoices for the House 45 and the Hua residence combined.

Complainant cannot unilaterally alter the terms of the contract. “The majority rule is that the contract must be signed by the party against whom it is sought to be enforced ....” Once two contracting parties agree to a contract term, such as price, “[o]ne party...cannot alter its terms without assent of the other party.” Therefore, “[o]rdinarily when a contractor makes a contract calling for performance of a job, in accordance with a certain plan, if nothing is said in regard to what shall be done in case he finds the work necessary to conform to the plan is for any reason more difficult or expensive than either party had anticipated, he must bear the cost of the excess of the contract price.”

A claim of set-off against monies that otherwise would be owed is an affirmative defense for which the party asserting the right to a set-off bears the burden to prove.

Regarding the House 45 project, Mackos introduced credible evidence by a preponderance, that all invoices have been paid. The revised estimate #241 presented by Smith to Mackos does not have any signature. Mackos signature does not appear on the estimate signifying its approval of revisions and there is no evidence of record that indicates Mackos ever approved of or authorized the revision of the bid. The revision asserted by Smith’s revised estimate #241 would have altered the total original bid of $83,893.21 to $90,109.21 – an increase of $6,216.00.

Complainant has not borne its burden to show entitlement to payment for revised estimate #241 increase of $6,216.00. Thus, Smith’s Complaint asserted claim of $27,340.72 is thereby reduced down to $21,124.72.

By a preponderance of the credible evidence presented, it is proven that some of the framing work provided by Smith required repair, pocket door tracks had to be removed and replaced and drywall patching was required to repair the pocket door tracks. Mackos has submitted sufficient credible evidence to demonstrate Mackos paid other contractors to repair the work provided by Smith in the amount of $13,490.00.

Mackos has met its burden and proven by a preponderance of the evidence that it is entitled an off-set in the amount of $13,490.00 from payment to Smith for the costs of completion. Thus, the previously reduced total claim of Smith is further reduced by off-set of $13,490.00 for the costs of completion from $21,124.72 down to $7,634.72.

There is no evidence of record to support that the $4,381.00 increase from bid #246 to #591 was authorized or approved by Mackos. Complainant, by a preponderance of the evidence, has not borne its burden to show entitlement to payment for the $4,381.00 increase from bid #246 to #591. Thus, the previously reduced total claim of Smith is further reduced by $ $7,634.72 down to $3,253.72.

There is insufficient evidence, by a preponderance, that Smith’s invoice #587 of $7,778.20 for “Hua extra charges” for a “Truss price increase is payable by Mackos.” It is not disputed that no engineer stamped drawings were provided to support this change and invoice. Moreover, invoice also shows finance charges for $113.25 and $114.95. There is no evidence of record demonstrating that Mackos agreed that late charges may be imposed. Complainant Smith has not borne its burden to show entitlement to payment #587 in the amount of $7,778.20. Thus, the previously reduced total claim of Smith for $3,253.72 is further reduced by $7,778.20 down to a negative ($4,524.48).

There is insufficient evidence, by a preponderance, that Smith’s invoice #599 in the amount of $7,460.00 is payable to Smith. Invoice 599 states: Per Invoice #543, we gave a CASH ONLY discount. The evidence is undisputed that there is no agreement, written or otherwise, that provides Mackos payments to be made in the form of cash only or to permit Smith to impose a 3% processing fee for non-cash payments as charged in the invoice. By a preponderance, the evidence demonstrates that the invoice #543 discount was given because the lumber order was pre-paid to lock in the price quoted by the lumber supplier – not for payments made in cash only. Complainant Smith has not borne its burden to show entitlement to payment #599 in the amount of $7,460.00. Thus, the previously reduced total claim of Smith of negative ($4,524.48) is further reduced by $7,460.00 down to a negative ($11,984.48).

There is insufficient evidence, by a preponderance, to prove that Smith’s invoice #586 to Mackos in the amount of $12,830.00 for extras is fully payable by Mackos. By a preponderance of the evidence it is proven that $7,550.00 of invoice #586 is duplicated in invoice #557 for trusses [see ¶7h hereinabove] and, by a preponderance of the evidence, is not due and payable to Smith.. The remainder of the invoiced items were for items the Mackos asserted were already paid for. There was no evidence offered to support that the remainder of this invoice were for items already paid for. Therefore, $5,280.00 of the #586 invoice is determined to be due and payable and, to the extent of $5,280.00 Smith has proven it is entitled to payment. Smith has met its burden, by a preponderance of the evidence, that it is entitled to partial payment of its invoice 586 in the amount of $5,280.00. Thus, the previously reduced total claim of Smith of a negative ($11,984.48) is adjusted by $5,280.00 to a negative ($6,704.48).

Smith has met its burden, by a preponderance of the evidence, that it is entitled to payment of its invoice #595 in the amount of $940.00. Thus, the previously reduced total claim of Smith of a negative ($6,704.48) is adjusted by $940.00 to a negative total of ($5,764.48).

Based upon the foregoing Smith is owed nothing on its invoices presented in evidence for the reason that after disallowed items and allowable off-sets pursuant to the foregoing, the amount owed by Mackos to Smith is a negative $5,764.48. By a preponderance of the evidence, Smith has failed to show payment was “due for materials or services rendered in connection with the licensee’s operations as a contractor. Smith has failed to meet its burden of proof by a preponderance of the evidence to show that Mackos has violated A.R.S. § 32-1154(A)(10)

The legislature has not empowered the Registrar or the Office of Administrative Hearings to award attorneys’ fees or general consequential or equitable damages that would be awardable in a civil court action. To the extent that either party is entitled to attorneys’ fees, interest, additional consequential damages or additional damages under equitable theories of quantum meruit, unjust enrichment, breach of contract or other causes of action, they should be free to pursue these remedies in a court of competent civil jurisdiction.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that the Registrar dismiss the complaint in Case Number 2017A-6293-NPC-ROC against Mackos Architecture and Construction LLC, License number 224228, without prejudice to Curt Smith Carpentry LLC, asserting its claim against Mackos in a court of competent civil jurisdiction.

Done this day, May 9, 2018.

/s/ Randolph D. Wolfson

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

By: _______