ALJDEC decisions subject to certification as final

2018A-04539-ROC · Registrar of Contractors · 2019-01-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 17, 2019, at 1:00 p.m. APPEARANCES: AZ State Electric LLC (“Complainant”) appeared through Mohamed Maloum, its qualifying party/member; Arizona Valley Home Builders LLC (“Respondent”) appeared through Bob Michael Ellis, its member. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure According to the Registrar of Contractors’ (“the Registrar’s”) public website, on or about February 11, 2012, the Registrar issued License No. ROC 277031 Specialty Dual CR-11 Electrical contracting to Complainant. Mohamed Maloum is the qualifying party/member and the only person currently listed on the license. On or about January 20, 2016, the Registrar issued License No. ROC 302555 for General Dual DB-2 Dual Residential and Small Commercial contracting to Respondent. Bob Michael Ellis is a member. John Arthur Grabow is the qualifying party. On or about September 24, 2018, Complainant filed a complaint with the Registrar alleging that Respondent had failed to pay three invoices pursuant to the parties’ verbal contract for electrical work.[1] Complainant Mr. Maloum’s written statement to the complaint, which provided in relevant part as follows: [Complainant] has had verbal agreement with [Respondent] for all work performed for over the past 2 years. Mike Ellis has been acting as a GC, hiring [Complainant] to do electrical work for the custom homes he is building. Shortly after hiring us, he would then hire unlicensed trades to also come and work alongside his licensed contractors he has also hired. As a result, he started making more pocket money by undercutting cost and then decided to not pay his licensed contractors. His excuse for non-payment on these invoices is that he’s waiting on a draw from the [lender] for months to pay invoices #0427, #0501, and #0703. We have patiently waited and have done additional work in a professional manner for him. However, he has now continuously threatened [Complainant] that we have done unprofessional electrical work and there are too many corrections needed to be done on all his homes.

Attached along with this statement [are] brief emails and text messages from Mike and his office staff to my office staff. At one point, he states he has mailed a payment however we never received payment. Throughout this process, we have warned him that if he is contracting us to do electrical and his guys touch our work and/or other electrical work within those homes, we [cannot] warranty our services.[2]

Complainant attached numerous texts and emails to and from Respondent, as well as the three invoices, as follows: (1) Invoice No. 0427, dated April 27, 2018, in the amount of $3,683.00 for “Electrical Rough in according to print” in a house being built at 35223 N. 7th Street, Phoenix, Arizona;[3] (2) Invoice No. 0501, dated May 1, 2018, in the amount of $1,425.00 for “Electrical Rough in according to print. Material” in the house being built at 35223 N. 7th Street, Phoenix, Arizona;[4] and (3) Invoice No. 0703, dated July 6, 2018, for “Various electrical for hot check throughout home” in a house being built at 35215 N. 7th Street, Phoenix, Arizona. On October 15, 2018, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent’s license.[5] Mr. Ellis on behalf of Respondent timely answered the Citation, admitting that Respondent contracted electrical work to Complainant, that Complainant performed the electrical work, but denying that Respondent had violated A.R.S. § 32-1154(A)(10), in relevant part as follows: [Respondent] contracted with [Complainant] to completely wire the houses located at 35237 and 35223 N7th St. Phoenix, AZ 85086. They were also hired by me to wire the houses located at 35209 N. 12th St Phoenix, AZ 85085 and 34904 N. 10th St Phoenix, AZ 85085. Our agreement was that I would provide them with [laborers] to hang the boxes and drill the holes. Afterwards [Complainant] would pull the wire.

I paid [Complainant] $55/hr per man to completely wire the houses and the panel boxes. However, once the homes were complete and the power turned on, several issues with the electrical started to manifest. For instance, they did not pull enough home runs nor connected them to light switches. [Complainant] has been made aware of these issues. To date they have refused to make any repairs in any of the projects. I have had to hire another electrical subcontractor to make the necessary repairs so that the houses can function. So far, I have run up a bill in the excess of $5,000.00 and the home is still not completely repaired. In addition, the breakers keep tripping due to faulty electrical wiring.

Also, the invoice provided for the home 35215 N. 7th St. Phoenix, AZ 85086 . . . is not my home. . . .[6]

The Registrar referred the matter to the Office of Administrative Hearings (“the OAH”), an independent agency, to schedule and to conduct an evidentiary hearing. On November 21, 2018, the Registrar issued a Notice of Hearing to be held before the OAH on January 17, 2019. The second page of the Notice of Hearing informed the parties that “[b]efore a hearing, the parties must prepare a disclosure statement. See A.A.C. R4-918 [sic].” The Registrar attached to the Notice of Hearing blank disclosure forms that the parties could use to disclose their witnesses and exhibits before the hearing. On January 9, 2019, Complainant filed its disclosure statement and provided its exhibits. A hearing was held on January 17, 2019. Complainant submitted six exhibits and presented the testimony of two witnesses: (1) Mr. Maloum; and (2) Mario Bello, Complainant’s superintendent on the jobs. Mr. Ellis testified on Respondent’s behalf. Respondent never filed a disclosure statement or submitted any exhibits. Hearing Evidence The parties took positions that were similar to the positions taken in their written statements to the Registrar. Complainant withdraw the claim for Invoice No. 0703 for work on the house being constructed at 35215 N. 7th St. in Phoenix, Arizona. Mr. Maloum testified that all the work for which Complainant sought payment was performed at the house being built at 35223 N. 7th St. in Phoenix, which was going to be Mr. Ellis’ personal residence. Mr. Maloum testified that Mr. Ellis did not start alleging poor work until after Mr. Maloum threatened to file a complaint with the Registrar if Complainant were not paid. Before that, Mr. Ellis had stated that it would cut a check as soon as it received money from the lender. Mr. Maloum testified that Complainant does rough-in electrical work for Respondent and comes back to do some work after mud has been applied to walls. Mr. Maloum and Mr. Bello testified that when Complainant returned to the jobs, Respondent’s unlicensed laborers were performing electrical work, including hanging fans. Complainant had to walk away because it cannot take responsibility for unlicensed contractors’ work. Mr. Maloum testified that it always does a “hot check” of an electrical system after APS turns on power to the main panel. Mr. Ellis insisted that Complainant use power for the “hot check” from a generator, which does not produce sufficient power. Complainant never had a chance to do a “hot check” of the house at 35223 N. 7th St. Mr. Ellis testified that power through APS is never turned on until the purchaser sets up an account with APS. A generator allows a quick “hot check” to be performed. Although the house at 35223 N. 7th St. was to be his personal residence, APS did not turn on power until after Complainant completed its work and left the jobsite. Complainant submitted Mr. Bello’s panel notes and calculations for the house at 35223 N. 7th St.[7] Complainant submitted emails from Respondent’s office manager, Fran, dated in May 2018, stating that Mr. Ellis had instructed her to pay Respondent’s invoices when the lender released funds[8] and making the same promise in June 2018.[9] On July 13, 2018, Mr. Ellis sent an email that provided in relevant part as follows: I’m replying to your email in regards to payment on 35223 N. 7th St. unfortunately we have been waiting for a draw from the investor on that property. I have yet to receive it.

As I understand from the investor he will only give me my red straw after I have completed the drywall. We are trying to obtain the framing and electrical and plumbing inspection on Monday. As soon as that is complete we can insulate and drywall. And at that point I will get you a draw so I can pay you thank you sincerely Mike.[10]

On July 26, 2018, Mr. Ellis sent the following email to Mr. Maloum: I am working with the bank trying to get more money to pay all of the subcontractors on this job. I hope to have it all wrapped up next week it has been a long and exhausting experience. Thank you for your patience.[11]

On August 1, 2018 and August 2, 2018, at 6:12 a.m., the following email exchange occurred between Mr. Ellis and Marcy Maloum, Mr. Maloum’s wife and Complainant’s office manager, in relevant part as follows: August 1, 2018 5:42 a.m. [Mr. Ellis:] Hi I need to fix a few things at 7th street on my home. I failed the inspection today. Please have Mario come by in the morning. Thanks mike also I will have a check for him

August 1, 2018 3:47 p.m. [Mrs. Maloum:] Hi Mike, You can mail out the check or you can deposit into our Chase account. As for Mario coming back, we are extremely busy at the moment. I will have to check Mohamed and see which day next seek he can come out . . . . Let me know if you will emailing the check or doing the deposit the account.

August 1, 2018 6:12 p.m. [Mr. Ellis:]There are some corrections that have to be made in order for me to pass my final inspection it will be reinspected tomorrow it is imperative that Mario come out today to repair the things that he did incorrectly. If he does not come out today and make the repairs I will hire an electrician to make the repairs and back charge you. This is my own personal home and I have to move in this weekend. All of these things are simple things that were not done correctly at the time they were installed. You will be held responsible. I will give you until o’clock this morning to have someone on site and then I will hire another electrician. . . .

August 2, 2018, at 2:34 p.m., [Mrs. Maloum:] You’ve failed to email us over your inspection report, we have yet to receive it. You also mentioned yesterday that if Mario came today, you would have had a check for us but apparently that was just to get Mario to come back out to your home on your demands. You never informed us of an inspection date, nor did you even try to schedule with us. You only demanded us to come out on your terms because you’ve failed inspection. You’ve had multiple trades doing your electrical.

As I’ve stated to you over the phone, you need to provide us a copy of your report so that we can schedule our guys to come back out and see if it’s any of the work we did. If so, we can discuss it.

At this stage, you’ve failed payment and have ignored us for months on payment therefore I have contacted the ROC and will be lodging a complaint against you for NON Payment. . . .[12]

Mr. Maloum testified that after Mr. Ellis said that the house at 35223 N. 7th St. had failed the county’s electrical inspection, he contacted the Maricopa County building department and learned that no final inspection had been performed and that there were only minor issues with the electrical system at the house at 35223 N. 7th Street. Complainant submitted an email from the Maricopa County Building Department dated January 7, 2019, in relevant part as follows: 310, 330, 340, 350 – DN. Not ready for rough trades inspection/ courtesy walk done. The following notes do not reflect a complete inspection. Electric: electric & plumbing is not fire- caulked, correct where more than 2 wires penetrate top plate, complete electrical in attic at HVAC units, incomplete inspection. . . .[13]

Beginning on August 1, 2018, Mr. Maloum and Mr. Ellis exchanged numerous texts, Mr. Maloum repeatedly requesting the inspection report and offering to schedule Mr. Bello to perform repairs, Mr. Ellis stating that he had already hired another electrician to make repairs, and Mr. Maloum stating that Complainant was not responsible for Respondent’s unlicensed laborers’ work, including installing fans and fixtures. On August 4, 2018, Mr. Ellis stated that Respondent’s office manager would be sending a check to Respondent. On August 6, 2018, Mr. Ellis started making complaints about the electrical work on the house at 35237 N. 7th St. The emails did not mention problems with any other houses on which Complainant had worked. Mr. Ellis testified that the house at 35223 N. 7th St. was still under construction and that Complainant had also worked for Respondent performing electrical work at houses located at 35237 N. 7th St., 34921 N. 10th St., and 35029 N. 12th St. Mr. Ellis testified that electrical problems have started occurring in all these houses. Mr. Ellis testified that Complainant was aware of the problems, but when Respondent complained about problems at the house at 35237 N. 7th St., Complainant said it could not get out for two weeks. Mr. Maloum testified that he was never told about any problems in the houses on 10th St. or 12th St. Mr. Ellis testified that the parties’ agreement was that Respondent would pay Complainant $55/man-hour and that Complainant usually had two men on site. Mr. Ellis testified that because he was not willing to pay a premium price for someone to drill holes and hang boxes, he used laborers employed by Respondent to perform this work, and expected Complainant to pull wire and make connections. Mr. Ellis testified that he also expected Mr. Bello to supervise Respondent’s laborers. Mr. Bello testified that Respondent’s laborers made up switches, installed fans, and pulled wire to put up the fans. Although he asked Respondent’s laborers to stop performing electrical work, they continued. Mr. Ellis testified that Complainant refused to perform repairs at any house until it was paid. He testified that Respondent paid another electrician $50.00/hour for 78 hours to repair the electrical system at the house at 35223 N. 7th St. Mr. Ellis testified that he hired “Shane from APS” to perform the repairs. Mr. Ellis did not provide any invoices, receipts, or the full name and license number of the electrician who allegedly performed the repairs. 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 current and in good standing. No discipline was shown as ever before having been taken before against Respondent’s license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[14] Complainant bears the burden of proof to establish cause to discipline Respondent’s contractor’s license by a preponderance of the evidence.[15] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[16] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[17] 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.”[18] 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.” Respondent acknowledged that Complainant performed $5,108.00 worth of electrical work on the house that Respondent was building as Mr. Ellis’ personal residence at 35223 N. 7th St. Respondent instead argued that it is excused from paying Complainant $5,108.00 for the work because the work was deficient, Complainant refused to repair the work, and any amount that would otherwise be owed is offset by the monies that Mr. Ellis paid unlicensed contractor “Shane from APS” to repair the work. Respondent also claimed that repairs were needed on three other houses that should offset any monies owed for work on the house at 35223 N. 7th St. These are affirmative defenses that Respondent bears the burden to establish by a preponderance of the evidence to avoid a violation of A.R.S. § 32-1154(A)(10). Respondent did not bear its burden to establish any affirmative defenses. First, Respondent did not complain about the work until after Complainant threatened to file a complaint with the Registrar. Respondent did not complain about the work at the houses on N. 10th St. and N. 12th Street until the hearing. Second, although at one time Respondent claimed that the house at 35223 N. 7th St. had failed inspection, it never produced any inspection report and Complainant’s evidence shows that the county inspector found only minor electrical issues at a preliminary inspection. Third, Respondent did not produce any credible evidence that it paid anyone, much less a qualified electrician, to repair any problems. Electrical contracting is a protected trade and Respondent’s General Dual KB-2 Dual Residential and Small Commercial license did not qualify it or its employees to perform electrical contracting work, including repairs.[19] For the foregoing reasons, Complainant has established that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant $5,108.00 for electrical work that Complainant performed on the house that Respondent was constructing at 35223 N. 7th St. for Mr. Ellis. RECOMMENDED ORDER Based on the foregoing, it is recommended that thirty calendar days after the effective date of the final order in this matter, License No. ROC 302555 of Respondent Arizona Valley Home Builders LLC shall be suspended until Respondent pays Complainant AZ State Electric LLC the sum of $5,108.00. It is further recommended that if, prior to thirty calendar days after the effective date of the final order, the Registrar receives proof in writing from Respondent that it has paid Complainant $5,108.00 in certified funds, the Registrar shall not suspend Respondent’s license but, instead, shall close Case No. 2018-04539. 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, January 31, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s electronic file at pdf 20-21, 35-36 [2] The Registrar’s electronic file at pdf 21, 36. [3] See the Registrar’s electronic file at pdf 43. [4] See the Registrar’s electronic file at pdf 44 [5] See the Registrar’s electronic file at pdf 5-8. [6] The Registrar’s electronic file at pdf 14. [7] See Complainant’s Exhibit 3. [8] See Complainant’s Exhibit 6 at 1. [9] See Complainant’s Exhibit 6 at 2. [10] Complainant’s Exhibit 6 at 5. [11] Complainant’s Exhibit 6 at 6. [12] Complainant’s Exhibit 6 at 7-8. [13] Complainant’s Exhibit 4. [14] See 32-1101 et seq. [15] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [16] See A.A.C. R2-19-119(B)(2). [17] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [18] Black’s Law Dictionary at page 1220 (8th ed. 1999). [19] See A.A.C.R4-9-104(A) (KB-2 license classification “allows the scopes of work permitted by the B-2 General Small Commercial and the B General Residential Contractor licenses.”). The B-2 small commercial license scope provides that “[w]ork related to electrical, plumbing, fire protection systems, air conditioning systems, boilers, swimming pools, spas and water wells must be subcontracted to an appropriately licensed contractor.” A.A.C. R4-9-102. Similarly, the scope a residential B general contracting license provides that “[w]ork related to electrical, plumbing, air conditioning systems, boilers, swimming pools, spas and water wells must be subcontracted to an appropriately licensed contractor.” A.A.C. R4-9-103.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826