ALJDEC decisions subject to certification as final

2017A-735-NPC-ROC · Registrar of Contractors · 2017-05-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Diamond J Trucking,

COMPLAINANT,

v.

Keith Smith Excavation LLC,

DBA: K S Excavation,

License No. KA.233738-D,

RESPONDENT.

No. 2017A-735-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 1, 2017, at 8:30 a.m.; the record was held open until May 15, 2017, to allow Complainant Diamond J Trucking to submit to Respondent Keith Smith Excavation LLC DBA: K S Excavation satisfactory proof of insurance or a workers’ compensation waiver. Although the record was also held open to allow Respondent to submit a written closing argument, it failed to do so.

APPEARANCES: Diamond J Trucking (“Complainant”) appeared through Larry Jacobs, its owner/operator; Keith Smith Excavation LLC, DBA: K S Excavation (“Respondent”) was represented by André E. Carman, Esq., Carman Law Firm, and James Sparks, Esq., Sparks Law Group.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On or about May 29, 2007, the Arizona Registrar of Contractors (“the Registrar”) issued License No. KA.233738-D for dual engineering to Respondent.

Complainant is an owner/operator who provides hauling and trucking services.

On February 7, 2017, Complainant filed a complaint with the Registrar alleging that Respondent owed Complainant a total of $19,500.00 for three different jobs, as follows: (1) $2,060.00 for services rendered on the Decca project between August 22, 2016, and August 24, 2016; (2) $5,400.00 for services rendered on the Crossroads Ranch project between August 30, 2016, and September 15, 2016; and 3) $12,040.00 for services rendered on the Dorn project between December 1, 2016, and December 22, 2016.

On February 24, 2017, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent.

Respondent filed a timely written answer to the Citation, denying any violation of A.R.S. § 32-1154(A)(10).

The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

A hearing was held on May 1, 2017. Complainant submitted two exhibits and presented the testimony of Mr. Jacobs. Respondent submitted three exhibits and presented the testimony of Keith Smith, its qualifying party/member.

Additional Hearing Evidence

The Decca Project

Mr. Smith acknowledged that Respondent owed Complainant $2,060.00 on the Decca project. Mr. Smith testified that the general contractor owed Respondent nearly $900,000.00 for that project. Mr. Smith testified that the project has been shut down and that the owner was going after the general contractor’s bond. Mr. Smith testified that he had hired attorneys to protect Respondent’s and its subcontractors’ interests on the Decca project.

The Crossroads Ranch Project

Mr. Smith testified that Respondent made a $2,000.00 good faith payment to Complainant after it filed the complaint for the Crossroads Ranch project and that, therefore, Respondent’s claim must be reduced to $3,400.00. Mr. Jacobs acknowledged that Respondent paid it $2,000.00 for the Crossroads Ranch project after the complaint was filed.

The parties’ agreement regarding Complainant’s hourly rates was not reduced to writing. The only documentary evidence regarding monies allegedly owed to Complainant were its invoices.

Mr. Jacobs testified that the parties’ agreement was that Respondent would pay Complainant $85.00/hour for his services, which included the cost of fuel. After Respondent had been paying Complainant $80.00/hour for some time, another trucker informed him that the market rate was $80.00/hour, and he reduced Complainant’s rates.

Mr. Smith testified that the parties’ agreement was always that Respondent would pay Complainant $80.00/hour. Mr. Smith testified that because Complainant had been charging Respondent $85.00/hour, Respondent had inadvertently overpaid Complainant on the Crossroads Ranch project. Mr. Smith explained that Respondent was deducting the amount allegedly overpaid from current amounts owed to Complainant on the Crossroads Ranch project.

Respondent submitted invoice no. 2015, dated January 2, 2017, in the amount of $1,774.80 as a back-charge on the Crossroads Ranch project for past alleged overpayments.

Respondent also submitted its invoice no. 2075 dated December 31, 2015, in the amount of $1,408.75 for the additional alleged overpayments on the Crossroads Ranch project.

Respondent attached to invoice no. 2075 ten of Complainant’s invoices. All of Complainant’s invoices showed an hourly rate of $85.00.

Mr. Smith testified that, due to the alleged overcharges, Respondent did not owe anything to Complainant for the Crossroads Ranch project.

The Dorn Project

Initially, Mr. Smith testified that Respondent had not paid Complainant for the Dorn project because Complainant had failed to provide proof of workers’ compensation insurance or a waiver. Mr. Jacobs testified that Respondent had never asked Complainant for proof of insurance and that, in any event, because he was a sole proprietor who did not have any employees, Complainant was not required to carry workers’ compensation insurance. As noted above, the record was held open to allow Complainant to submit proof of insurance or a waiver. At a status conference on May 15, 2017, Respondent’s attorney acknowledged on the record that Complainant had provided satisfactory proof of insurance or a waiver.

Mr. Smith testified at the hearing on May 1, 2017, that Complainant had hauled materials for Respondent to the Morning Stone job on Rolling Hills Drive, which was a different project than the Dorn project. The general contractor on the Morning Stone job was Kern Kendall. Mr. Smith testified that because Complainant wrote “Boulders” or “Dorn” on its invoices, Complainant mistakenly attributed hours that should have been charged to the Kern Kendall/Morning Stone/Rolling Hills Drive project to the Boulders/Dorn project.

Mr. Smith testified that Respondent had not been paid for the Kern Kendall/ Morning Stone/Rolling Hills Drive project and that Kern Kendall still owed $14,000.00 to Respondent for the job. Mr. Smith testified that the parties’ verbal agreement was that Respondent would pay Complainant when it got paid on the project.

Mr. Jacobs testified that the parties’ agreement was that Respondent would pay Complainant’s outstanding invoices every two weeks, on the 1st and 15th of the month.

Complainant submitted a note signed by Kern Kendall that stated that Respondent had been paid for the job at 1671 Rolling Hills Dr. on December 23, 2016.

Mr. Smith testified that Complainant had incorrectly billed to the Dorn job a total of $2,940.00 work that should have been billed to the Morning Stone/Kern Kendall/ Rolling Hills Drive project.

Mr. Smith testified that Respondent would pay all monies otherwise owed to Complainant for the Dorn job as soon as it received satisfactory proof of insurance or a waiver. As of this date, the Office of Administrative Hearings has not received any notice from the parties that Respondent has paid Complainant any additional monies for the Dorn project.

Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s disciplinary history at the Registrar’s public website. On this date, Respondent’s license was current and in good standing. Respondent’s license had never been suspended, either as discipline or administratively.

CONCLUSIONS OF LAW

This dispute lies within the Registrar’s jurisdiction to resolve.

Complainant bears the burden of proof to establish cause to discipline Respondent’s contractor’s license 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, 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.”

A contractor’s inability to pay and non-payment by a property owner or general contractor on a job is an affirmative defense that Respondent bears the burden to prove. Respondent established that Respondent lacked the ability to pay Complainant and that Respondent had not been paid for the Decca project. Therefore, Complainant did not establish cause to discipline Respondent’s contractor’s license under A.R.S. § 32-1154(A)(10) at this time because it failed to pay Complainant $2,060.00 for the Decca project.

The parties agreed that Respondent had paid Complainant an additional $2,000.00 on the Crossroads Ranch project. Entitlement to offsets against the amounts that otherwise would have been owed is also an affirmative defense that Respondent bears the burden to prove. Mr. Jacobs credibly testified that the parties’ initial agreement was that Respondent would pay Complainant $85.00/hour and that Mr. Jacobs later agreed to reduce the hourly rate to bring the rate into line with the market at that time. Complainant’s invoices showed a rate of $85.00/hour and Respondent paid this rate. Because Mr. Smith relied on his staff for the terms of Respondent’s agreement with Complainant, his testimony that Complainant’s hourly rate had always been $80.00 was not as credible as Mr. Jacobs’ testimony, which was based on first-hand knowledge and experience.

Therefore, Respondent did not establish that it is entitled to an offset for the Crossroads Ranch project. Complainant established that Respondent owes him $3,400.00 on the Crossroads Ranch project, thereby furnishing cause to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(10).

Respondent also did not establish that Complainant’s alleged invoicing to the wrong job justifies Respondent’s failure to pay for services that Complainant invoiced to the Dorn project or the Kern Kendall project. Respondent also did not establish that it lacks the ability to pay and has not been paid for the Dorn project or the Kern Kendall project. Therefore, Complainant established that Respondent owes him $12,040.00 on the Dorn project and/or Kern Kendall project, thereby furnishing cause to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(10).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Respondent Keith Smith Excavation LLC DBA: K S Excavation’s License No. DA.233738-D shall be suspended until the Registrar receives written proof that Respondent has paid $15,440.00 to Complainant Diamond J Trucking.

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.

Done this day, May 19, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors