ALJDEC decisions subject to certification as final

2018A-04658-ROC · Registrar of Contractors · 2019-01-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 07, 2019 at 1:30 PM. APPEARANCES: Joel Ortega appeared on behalf of Inground Excavation & Demolition LLC (“Complainant”). Jason Skernich appeared on behalf of Flowing Wells Landscape and Design Inc. (“Respondent”) with Michael Bolding as a witness. No appearances by or on behalf of the Registrar of Contractors (“ROC”). Angie Sweeney observed. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the ROC. FINDINGS OF FACT Background and Procedure 1. According to the ROC’s public website, on or about September 16, 2010, the ROC issued License No. 267557, general residential B-5 general swimming pool contracting license, to Respondent.[1] On or about September 20, 1998, the ROC issued License No. 138690, specialty dual CR-21 hardscaping and irrigation systems contracting license, to Respondent.[2] Mr. Jason Robert Skernich (“Mr. Skernich”) is the Qualifying Party/Officer on both licenses. Respondent’s address of record on each license is 2705 S. Alma School Rd Ste. 2 Chandler, AZ 85286-4400.[3] 2. Respondent and Complainant have had a professional relationship for nearly a decade whereby Respondent would hire Complainant as a subcontractor for residential excavation projects. 3. In summer of 2018, Respondent was hired by a homeowner (“Homeowner”) to build a residential in-ground pool. Respondent, who knew the excavation for the project would be a “hard dig,” accepted bids from subcontractors for the job. Complainant was hired, in part, because Complainant submitted a low bid with assurances that excavation could be completed timely. 4. The parties entered into a contractual agreement via text message whereby Complainant would perform excavation for the pool project for $7,000.00. 5. Complainant began excavation on the project June 04, 2018. 6. Complainant did not finish excavation on the project. 7. Respondent did not remit any monies to Complainant for the excavation work Complainant performed. 8. Respondent hired another subcontractor to complete excavation on the pool project, which was finished on July 06, 2018. 9. On September 26, 2018, Complainant filed a complaint with the ROC alleging that Respondent owed an outstanding balance of $5,200.00 for excavation services rendered on the pool project.[4] Complainant attached a one page letter to its complaint from its President, Joel Ortega, which argued that Complainant was owed $5,200.00 of the $7,000.00 contract because Complainant had performed eighty hours of labor and completed seventy-four percent of the project. Complainant also included an accompanying invoice. 10. The ROC received Complainant’s complaint on October 01, 2018. The ROC assigned Case 2018-04658 to Doug Ulmer for investigation. 11. On October 03, 2018, the ROC issued a letter to both parties advising receipt of Complainant’s complaint.[5] Respondent was advised that it had until October 10, 2018, to submit any affirmative defenses and/or file a response.[6] 12. Respondent did not file a response or affirmative defenses. 13. On October 19, 2018, the ROC issued a Citation For Alleged Violation of A.R.S. § 32-1154(A)(10).[7] The written complaint charged Respondent with the commission of an act or acts that would, if proved, be cause for the suspension or revocation of Respondent’s license under Ariz. Rev. Stat. § 32-1154(A)(10), which states, in pertinent part: The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions:

Failure by 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.

Respondent was required to provide a written Answer per Ariz. Rev. Stat. § 32-1155(A) by November 05, 2018. 14. On October 23, 2018, Respondent filed its Answer with the ROC.[8] Respondent argued, overall, that Complainant had essentially abandoned their responsibilities in the pool excavation project, and that although Respondent had tried to get Complainant to return to no avail, Respondent was forced to hire a replacement subcontractor to finish the excavation so that the project could be completed and appease Homeowner. 15. Because Respondent contested the charged complaint, the ROC referred this matter to the Office of Administrative Hearings on November 20, 2019, an independent state agency, and issued a Notice of Hearing for an evidentiary hearing on January 07, 2018, to determine the validity of the contested charge. 16. Neither party requested that Mr. Ulmer be compelled to appear as a ROC witness, nor did either party request an informal Settlement Conference in this matter. Hearing Evidence 17. At the hearing, Joel Ortega testified on behalf of Complainant, and Jason Skernich and Michael Bolding testified on behalf of Respondent. The notice of hearing and hearing file were admitted into the evidentiary record. No additional exhibits were offered for submission by either party. Jason Skernich’s testimony 18. Mr. Skernich testified that he was aware the pool project would be a “hard dig” because he hired a subcontractor to perform a test dig before he accepted any other subcontractor bids for the job. Mr. Skernich testified that he hired Complainant, in part, because Complainant put in one of the lower bids for the job and also alleged they could complete the excavation quicker than other bidders. 19. Mr. Skernich testified that he never fired Complainant from the pool project. Per Mr. Skernich, he received a call from Homeowner alleging that Complainant walked-off the job prior to completing the pool excavation. Mr. Skernich testified that when he reached out to Complainant to check the status of the excavation, he was told that Complainant’s excavator had broken during the dig. Per Mr. Skernich, Complainant’s office manager demanded $2,900.00 from Respondent to cover the cost of the excavator repair. Mr. Skernich testified that he initially refused, but relented after two weeks so the project could resume and appease Homeowner’s increasing frustrations with him. 20. Per Mr. Skernich, he repeatedly offered to cover the excavator repair for Complainant and deduct it from the total contract price, but Complainant never responded. Mr. Skernich testified that he and other employees called Complainant multiple times to get Complainant to return to the pool project, to no avail. After several weeks of little to no communication, Mr. Skernich hired a replacement excavation subcontractor on June 20, 2018. 21. The replacement crew began excavation on July 02, 2018, and finished on July 06, 2018, even working on July 04, 2018. 22. Mr. Skernich testified that after the project was complete he received a complaint from Homeowner regarding oil stains on her driveway and several pot holes in the road in front of her home. 23. Per Mr. Skernich, he called Complainant to advise of the damage(s) Homeowner sustained and to try to strike a remediation agreement. Mr. Skernich testified that no remediation agreement between the parties was reached. 24. Mr. Skernich admitted that Complainant was never paid, in any amount, for the pool project. Mr. Skernich argued that payment was not due because Complainant did not complete the job per contract, caused damage to Homeowner’s property, and Complainant failed to pay for remediation. Michael Bolding’s testimony 25. Mr. Bolding testified that he was the construction supervisor on the underlying pool project. 26. Mr. Bolding testified that although he was not present June 04, 2018, to observe the start of Complainant’s work, he was present their last day on site. Per Mr. Bolding, Complainant only removed the top soil from the dig site, approximately ten percent of the total dig area, at the time they walked-off the job which was two to three days after Complainant started. Mr. Bolding further testified that Complainant removed its excavator from the project site at that time, and that the excavator was operational at the time it was removed. 27. Mr. Bolding testified that Complainant’s office manager demanded $2,900.00 from Respondent to cover the cost of the excavator repair, and that he discouraged Mr. Skernich from agreeing, but that Mr. Skernich conceded after two weeks because he was worried about mediating damage to Respondent’s professional reputation due to their five week delay. Mr. Bolding testified that, despite calling Complainant for several weeks, Complainant never responded to Mr. Skernich’s offer. 28. Mr. Bolding testified that Respondent did not fire Complainant, rather, Respondent begged Complainant to return to work and complete the excavation. 29. Mr. Bolding testified that Respondent hired a subcontractor to replace Complainant, and also covered $1,200.00 in damages to Homeowner to cover repairs to her street and driveway. Joel Ortega’s testimony 30. Mr. Ortega testified that he was on vacation at the time of the pool project and did not observe any of the work or project conditions when his crew began or left the site. Per Mr. Ortega, he was informed by a crewmember that his excavator broke during the project and slowed down the crew’s progress on the dig. 31. Mr. Ortega testified that he was phoned by Mr. Skernich and fired for working too slowly days into the dig. 32. Mr. Ortega testified that his excavator was under warranty at the time it broke down and that he could have had it repaired or replaced it with another machine. 33. Mr. Ortega further testified that he believed his crew began work on the pool project June 04, 2018, and worked for two or three days, between seven and eight hours each day, prior to leaving the job. 34. Mr. Ortega could not explain why he initially alleged to the ROC that his crew completed eighty hours of labor. Yet, Mr. Ortega insisted during his testimony that his crew had completed seventy-four percent of the pool project at the time of termination. 35. Mr. Ortega admitted that he was never provided any evidence to substantiate the claim that his crew had completed seventy-four percent of the pool project. Mr. Ortega offered no additional evidence which tended to suggest that Respondent should be pay Complainant seventy- four percent, or $5,200.00, of the $7,000.00 contract rate. 36. Per Mr. Ortega, he had forgotten that Mr. Skernich owed him monies from the pool project, but was reminded approximately two months later during a telephone call with Mr. Skernich. During the call, Mr. Skernich accused Mr. Ortega of pot hole and oil damages on Homeowner’s property and demanded Mr. Ortega pay associated remediation costs. Because the parties could not agree, Mr. Ortega decided to file a complaint with the ROC. 37. Mr. Ortega also acknowledged that his office manager never informed him that Respondent agreed to cover the $2,900.00 excavator repair cost so that Complainant could finish the pool project. 38. Notably, Mr. Ortega was impeached during his cross-examination whereby he admitted that the claim that his excavator had broken down was disingenuous. Mr. Ortega clarified that his office manager had initially informed Respondent that its excavator had broken and required a $2,900.00 repair, but the truth was that Complainant wanted an advance and the “broken excavator” claim was a ruse. Complainant’s excavator was never broken. 39. Mr. Ortega further acknowledged that he was aware Respondent had placed several calls to him while he was on vacation and that he failed to return the calls. CONCLUSIONS OF LAW 1. The ROC has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). 2. Complainant bears the burden of proof to establish Respondent committed a statutory violation by a preponderance of the evidence.[9] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[10] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[11] 3. Ariz. Rev. Stat. § 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.

4. In the present case, Respondent has conceded that Complainant was not paid for the work it performed on the pool project. However, Respondent has also established that Complainant was not fired from the job, and that Complainant did not complete the job as contracted, let alone complete seventy-four percent of the project. 5. Here, Complainant came before this tribunal with unclean hands. 6. The record reflects that Complainant was dishonest with Respondent when it alleged that its excavator broke down on site, requiring a $2,900.00 repair, when in reality Complainant was trying to obtain an advance of payment by fraudulent means. Complainant was further disingenuous as Mr. Ortega freely admitted that, at most, his crew completed twenty-four hours of labor on the job, not eighty as originally alleged. Mr. Ortega’s argument that seventy-four percent of the work was completed in that timeframe is unreliable, unfounded, and improbable. 7. Respondent’s contention that Complainant abandoned the project without just cause is probable. 8. Therefore, Complainant failed to establish cause for the ROC to suspend or revoke Respondent’s contractor’s license under Ariz. Rev. Stat. § 32-1154(A)(10), as the evidence establishes that Complainant failed to uphold its contractual agreement with Respondent, and further failed to prove that it completed a specific portion of work before abandoning the project. 9. This tribunal, however, is unable to determine how much work Complainant completed on the underlying project as there is insufficient information in the record to make a factual finding. RECOMMENDED ORDER Based on the foregoing facts and conclusions of law, IT IS RECOMMENDED that on the effective date of the final order in this matter, Complainant’s appeal shall be denied. Respondent Flowing Wells Landscape and Design Inc. License Nos 267557 and 138690 shall neither be revoked nor suspended pursuant to Ariz. Rev. Stat. § 32-1154(A)(10). 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 is forty days after the date of that certification. Done this day, January 15, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACM4uEAH. [2] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACUAFEA5. [3] Id. [4] See Hearing File, page 12. [5] See Hearing File, page 35. [6] Id. [7] See Hearing File, pages 2-7. [8] See Hearing File, pages 66-79. [9] See Ariz. Rev. Stat. § 41-1092.07(G)(2); Ariz. Admin. Code R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [10] Morris K. Udall, Arizona Law of Evidence § 5 (1960). See also Black’s Law Dictionary 1373 (10th ed. 2014) which states that 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.” [11] See Ariz. Admin. Code R2-19-119(B)(2).

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