ALJDEC decisions subject to certification as final

2018A-05442-ROC · Registrar of Contractors · 2019-07-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 25, 2019 9:00 AM through 5:00 PM, and June 26, 2019 9:00 AM through 5:00 PM.[1] APPEARANCES: Evan Schube, Esq. appeared on behalf of Colter Electric LLC (“Complainant”) with Colter Van Wagenen, Thomas Kane, and Robert Oberly as witnesses. Evan Thompson, Esq. appeared on behalf of Miramonte Arizona LLC (“Respondent”) with Terry Tennyson, Nathan Geisler, Jessica Morin, and Jack Martin as witnesses. Maryanne Sullivan observed. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT Background and Procedure 1. Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s active license file as shown on the Registrar’s public website June 26, 2019. On December 24, 2007, the Registrar issued License No. 241199 for General KB-1 Dual Building contracting license to Respondent.[2] Christopher Lee Kemmerly is listed as the Qualifying Party/Parent Entity on the license. The address of record for the license is 2502 E River Rd, Tucson, Arizona 85718-6509.[3] There is an active $20,000.00 surety bond listed for the license issued by Developers Surety & Indemnity.[4] There is no prior discipline listed against the license. However, there is one open case against the license which is presumably Complainant’s. 2. On November 14, 2018, the Registrar received a complaint[5] from Complainant alleging nonpayment of services and/or materials against Respondent for the following invoices: | |INVOICE # |DATE |PROJECT SITE |AMOUNT BILLED | |1 |2465 |01/06/2018 |Walnut Cottages |$293.19 | |2 |2469 |01/06/2018 |Walnut Cottages |$80.00 | |3 |2488 |01/17/2018 |Switzer Canyon |$246.28 | |4 |2489 |01/06/2018 |Switzer Canyon |$180.00 | |5 |2548 |01/16/2018 |Switzer Canyon |$1,197.61 | |6 |2549 |01/16/2018 |Switzer Canyon |$215.00 | |7 |2539 |02/06/2018 |Switzer Canyon |$802.18 | |8 |2603 |03/13/2018 |Switzer Canyon |$180.00 | |9 |2604 |03/13/2018 |Switzer Canyon |$126.65 | |10 |2607 |03/13/2018 |Switzer Canyon |$985.00 | |11 |2608 |03/13/2018 |Switzer Canyon |$910.00 | |12 |3010 |03/20/2018 |Switzer Canyon |$135.00 | |13 |3011 |03/20/2018 |Switzer Canyon |$270.00 | |14 |3046 |04/03/2018 |Switzer Canyon |$802.18 | |15 |3049 |04/03/2018 |Switzer Canyon |$255.00 | |16 |3050 |04/03/2018 |Switzer Canyon |$922.16 | |17 |3051 |04/03/2018 |Switzer Canyon |$922.16 | |18 |3073 |04/11/2018 |Walnut Cottages |$315.00 | |19 |3074 |04/11/2018 |Switzer Canyon |$4,101.84 | |20 |3075 |04/11/2018 |Switzer Canyon |$3,658.24 | |21 |3089 |04/24/2018 |Walnut Cottages |$180.00 | |22 |3099 |05/04/2018 |Switzer Canyon |$1,040.00 | |23 |3100 |05/04/2018 |Switzer Canyon |$9,271.65 | |24 |3101 |05/04/2018 |Switzer Canyon |$10,833.99 | |25 |3102 |05/04/2018 |Switzer Canyon |$7,184.35 | |26 |3103 |05/04/2018 |Switzer Canyon |$6,897.26 | |27 |3104 |05/04/2018 |Walnut Cottages |$180.41 | |28 |3105 |05/04/2018 |Walnut Cottages |$3,541.48 | |29 |3106 |05/04/2018 |Walnut Cottages |$6,673.88 | |30 |3107 |05/04/2018 |Flagstaff Ranch |$722.16 | |31 |3108 |05/04/2018 |Presidio Garden |$131.80 | |32 |3109 |05/04/2018 |Presidio Garden |$131.80 | |33 |3110 |05/04/2018 |Presidio Garden |$131.80 | |34 |3111 |05/04/2018 |Presidio Garden |$131.80 | |Total billed |$63,518.07 |

Specifically, Complainant alleged that Respondent failed to pay Complainant for work and/or materials provided prior to Respondent’s termination of the parties’ contract agreement. The Registrar designated it Complaint No. 2018- 05442 and assigned the case to Doug Ulmer in their legal department for investigation. 3. On November 19, 3018, the Registrar issued a letter to Respondent providing notice of Complainant’s complaint, and informed Respondent that it was free to raise any affirmative defense(s) or provide additional information by November 26, 2018.[6] 4. On November 26, 2018, Respondent, through its attorney, responded to the Registrar regarding Complaint No. 2018- 05442.[7] Although Respondent acknowledged the former existence of a contractor/subcontractor relationship between the parties, Respondent neither admitted nor denied owing outstanding monies to Complainant pursuant to their Master Subcontract Agreement (“MSA”). Instead, Respondent accused Complainant of causing a fire at a project site, as a direct result of alleged defective workmanship, and argued that Complainant was liable for the subsequent damage caused. Respondent declined to pay the money at issue, and requested that Complaint No. 2018-05442 be dismissed. 5. On November 30, 2018, the Registrar issued a Citation to Respondent for an alleged violation of Ariz. Rev. Stat § 32- 1154(A)(10).[8] Respondent was notified that a failure to provide an Answer by December 17, 2018, would be deemed as an admission of Respondent’s commission of the act(s) charged in the underlying complaint, pursuant to Ariz. Rev. Stat § 32- 1155(B), and could result in discipline against Respondent’s license including suspension or revocation.[9] 6. On December 05, 2018, the Registrar received Respondent’s Answer whereby Respondent generally denied all of Complainant’s factual allegations and alleged legal violation(s), and again asked the Registrar to dismiss the complaint.[10] 7. On December 21, 2018, the Registrar issued an Order denying Respondent’s request to dismiss.[11] 8. On January 04, 2019, the Registrar issued a Notice of Hearing setting the above-captioned matter for hearing at 1:00 p.m. on March 04, 2019, before the Office of Administrative Hearings, an independent state agency.[12] The Notice of Hearing shows that the hearing was being conducted on the charges made in the Citation and Complaint.[13] Hearing Evidence 9. Complainant called Colter Van Wagenen and Robert Oberly as witnesses, Thomas Kane as an expert witness[14], and submitted eighteen exhibits into the record. Respondent called Terry Tennyson, Nathan Geisler, and Jessica Morin as witnesses, Jack Martin as an expert witness, and submitted eleven exhibits into the record. The Registrar’s electronic file and Notice of Hearing were also admitted into the record. 10. On January 14, 2014, the parties entered into the MSA for Complainant to provide electrical subcontracting work for Respondent’s residential new builds in northern Arizona; at Switzer Canyon, Flagstaff Ranch, Presidio Garden, and Walnut Cottages project sites respectively.[15] Specifically, Complainant was to provide temporary power to all project sites, perform rough end work (i.e. all pre-drywall work), and perform final work and trim. 11. On September 05, 2014, the Switzer Canyon contract was signed by the parties.[16] The contract outlined the parties’ rights and responsibilities regarding the project. 12. Respondent’s General Requirements were incorporated into Complainant’s contract agreement, and were in effect during all applicable times.[17] 13. Arizona adopted the 2012 International Residential Code (“IRC 2012”) with amendments.[18] The IRC 2012 is a comprehensive residential model code that provides the foundation for state and local building, plumbing, mechanical, gas, energy, and electrical code provisions. Section R107.3 holds that a building official is authorized to give permission to temporarily supply and use power in part of an electric installation before such installation has been fully completed and the final certificate of completion has been issued.[19] Section 590 of the 2014 National Electrical Code Handbook (“NEC 2014”) also applies to temporary installations.[20] Section 590.2 holds that temporary installations shall be installed in accordance with permanent installation requirements. Section 590.4 and 240 hold that conductors shall have overcurrent protection.[21] 14. The local electric utility company, Arizona Public Service (“APS”) Company, was responsible for installing the meter at each residential build erected on all project sites.[22] This would only be done once Complainant’s electrical panel received a service approval tag from the city and passed APS’ inspection. The project site superintended was responsible for informing Complainant of the scheduled meter installation so that it could be “made safe,” as the meter would be installed by APS in factory mode. In order to energize the meter, it would have be switched to the “off” position and then to the “on” position. The superintendents for Presidio Garden, Flagstaff Ranch, and Walnut Cottages made Complainant aware of their respective meter installations. However, Switzer Canyon’s superintendent did not notify Complainant about the scheduled meter installation for its project site. 15. On April 24, 2018, a structure fire occurred on Lot 30 of the Switzer Canyon development. The fire was not a result of Complainant’s wiring workmanship. The fire was caused when an unknown person turned on the main breaker; which energized and overloaded properly sized bundled wires with higher than engineered voltage upon contact with the bus bar.[23] The main breaker panel had not been locked, nor was there any signage postage to indicate its incompleteness or warning not to turn on. 16. On April 27, 2018, Respondent terminated Complainant pursuant to section 14(g) of the MSA.[24] Although no specific complaint was listed in the termination letter, Respondent declared that any liability for its payment of work that Complainant had performed through that date was offset by “any amounts chargeable to Subcontractor by Contractor pursuant to any provision of the Contract.” Respondent argued that sections 6 and 15 of the MSA survived termination. Specifically, Respondent argued that Complainant had warranted that all of its work performed under the contract was “free from defects and in strict conformance with the Contract Documents,” and that Complainant was required to indemnify Respondent for “damages of any type” arising out of work Complainant had performed on the Switzer Canyon development. Respondent also argued that because Complainant’s work was defective, and as a result caused the Lot 30 fire, Complainant created liabilities for Respondent that exceeded any amount owed to Complainant – including remediations of Complainant’s pre-fire work at other development sites. 17. At the time of MSA termination, Complainant had thirty-four outstanding invoices totaling $63,518.07 pending for payment with Respondent. All invoices were for work and/or materials that were provided to, and approved by, Respondent prior to MSA termination. All invoices Complainant submitted prior to the fire were paid in full by Respondent. 18. Respondent back-charged Complainant for hiring a replacement subcontractor to correct and complete work Complainant had been hired to do. Respondent admitted that it withheld $37,327.01 from Complainant for this reason and conceded it would owe the monies if no dispute existed. Respondent further conceded that Complainant was not permitted to remediate alleged workmanship issues Respondent discovered post-fire because “there was no trust.” 19. At no time during Complainant’s tenure as Respondent’s electrical subcontractor did Respondent issue any workmanship reprimands or warnings to Complainant. All of Complainant’s prior work was approved by Respondent and city inspectors, including Complainant’s rough end work on Lot 30 at Switzer Canyon. 20. On or about October 30, 2018, Respondent received a check from its insurance company regarding Switzer Canyon’s Lot 30 damages.

CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction and has been properly brought before the Office of Administrative Hearings for adjudication.[25] 2. Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence.[26] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[27] 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.”[28] 4. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.[29] 5. Statutes should be interpreted to provide a fair and sensible result.[30] Statutes shall be liberally construed to affect their objects and to promote justice.[31] 6. Neither Ariz. Rev. Stat. § 32-1129 et seq., nor Ariz. Rev. Stat. § 12-2501(F)(1) are applicable to the matter at bar. 7. Ariz. Rev. Stat. § 32-1154(A)(10) holds, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a “[f]ailure by [the] 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, 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.” 8. The material facts in this matter are not in dispute. The credible evidence of record reflects that Respondent owes Complainant an outstanding balance of $63,518.07, per invoices for work performed and/or materials supplied January through May of 2018, based on valid subcontracting agreements executed between the parties in 2014. 9. Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to timely and completely furnish Complainant all monies owed on the projects per contract. This is an affirmative defense that Respondent bears the burden to establish. 10. To that end, Respondent argued that Complainant was liable for the Lot 30 fire at Switzer Canyon, and as such Respondent was relieved of paying Complainant for work and/or materials Complainant provided prior to April 24, 2018. These are red herring fallacies. No evidence was presented to establish that Complainant was liable for the Lot 30 fire. Even if Respondent had established that fact, there is no provision within the MSA or elsewhere that permits Respondent from forgoing payment of monies owed to Complainant upon termination of the parties’ contract. The MSA’s indemnity clause, for the purposes of this hearing, is not relevant. The record shows that Respondent failed to pay Complainant for labor and/or materials. There is no credible evidence to support an argument that Respondent was or is insolvent. 11. Therefore, Respondent has failed to establish an affirmative defense under Ariz. Rev. Stat. § 32-1154(A)(10). 12. The undersigned Administrative Law Judge finds that Complainant has established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10). As such, Complainant has also established cause for the Registrar to suspend or revoke Respondent’s contractor’s license. 13. Considering the facts and circumstances of this matter, Respondent’s license shall be suspended. RECOMMENDED ORDER Based on the foregoing, IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Miramonte Arizona LLC’s Contractor’s License No. 241199 shall be suspended until Respondent has provided satisfactory written proof to the Registrar that Respondent has paid Complainant Colter Electric LLC the sum of sixty-three thousand five hundred eighteen dollars and seven cents ($63,518.07) in certified funds. 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, July 18, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The hearing record in this matter was held open until July 05, 2019, to allow the parties to provide supplemental exhibits to the Office of Administrative Hearings. [2] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACZTTEA5. The license is renewed through December 31, 2019. [3] Id. [4] Id. [5] See the Registrar’s electronic file at page 76. [6] See the Registrar’s electronic file at page 112. [7] See the Registrar’s electronic file at pages 113-114. [8] See the Registrar’s electronic file at pages 149-154. [9] Id. [10] See the Registrar’s electronic file at pages 6-7. [11] See the Registrar’s electronic file at pages 4-5. [12] See Notice of Hearing. The matter was rescheduled and set for hearing on June 25-26, 2019. [13] Id. [14] See Complainant’s Exhibit 19. [15] See Respondent Exhibit 1; see also Complainant Exhibit 2. An unrelated Amendment to the MSA was signed on May 03, 2016. [16] See Complainant Exhibit 4; see also Respondent Exhibit 3. [17] See Complainant Exhibit 3; see also Respondent Exhibit 2. [18] City of Flagstaff adopted, with amendments 06/20/2017, as Flagstaff City Code. See Complainant Exhibit 24. [19] See Respondent Exhibit 8. [20] See Respondent Exhibits 10-11. [21] Id. [22] See Complainant Exhibits 17-18 and 22; see also Respondent Exhibit 8. [23] See Complainant Exhibit 16; see also Respondent Exhibit 4. [24] See Complainant Exhibit 13. [25] See Ariz. Rev. Stat. §§ 32-1101 et seq., 32-1154(A), and 41-1092 et seq. [26] See Ariz. Admin. Code R2-19-119. [27] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [28] Black’s Law Dictionary at page 1220 (8th ed. 1999). [29] See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). [30] See Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) (“Courts will not place an absurd and unreasonable construction on statutes.”). [31] See Ariz. Rev. Stat. § 1-211(B).

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