ALJDEC decisions subject to certification as final

2018A-2512-ROC · Registrar of Contractors · 2018-11-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 23, 2018 APPEARANCES: Denis Fallon, Complainant, William A. Kozub, Esq., Counsel for the Complainant; Luigi Micela, Respondent, Everett S. Butler, Esq., Counsel for the Respondent, Jack Grim, ROC Investigator. ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson _____________________________________________________________________

FINDINGS OF FACT On June 4, 2018, DW Acquisition Inc., d/b/a Door Works [“DW”] filed a written Complaint with the Arizona Registrar of MPIs.[1] The written Complaint[2] charged Micela Properties Inc., [“MPI]” with the commission of an act or acts that would, if proved, be cause for the suspension or revocation of Micela Properties Inc.’s license nder A.R.S. § 32- 1154(A)(10)[3] On June 29, 2018, the Registrar issued a Citation against MPI alleging one charge: violation of § 32-1154(A)(10)[4] The Registrar referred this matter to the Office of Administrative Hearings, an independent state agency, [“OAH”], for an evidentiary hearing regarding DW’s Complaint against the MPI. Hearing on the matter commenced before the OAH on September 20, 2018. DW was unable to submit its entire case-in-chief during the time allotted for at the September 20, 2018 hearing. Therefore, the matter was continued until October 23, 2018 for Further Hearing. On October 23, 2018, further hearing on the matter was conducted and concluded.

Exemption Eligibility Under A.R.S. § 32-1121(A)(5) MPI asserts that its officer and president, Luigi Micela[5] - not MPI - contracted with DW as an individual for construction on a home which Mr. Micela intended to reside and does live in. MPI argues Mr. Micela is not required to be licensed under A.R.S. § 32-1121(A)(5)[6] and, therefore, MPI could not have committed any misconduct that would constitute cause to penalize MPI’s license.[7] It is noted that Luigi Micela is not the owner of the property where DW was contracted to do work. The title to the property in question is shown by warranty deed of record with the Maricopa County Recorder as being vested in Micela Properties Enterprises, LLC – not Luigi Micela.[8] Luigi Micela, purporting to be a builder-owner, does not qualify for the exemption allowed by A.R.S. § 32-1121(A)(5) because he does not own the property in question were MPIs DW were contracted to work. Thus, in order for Mr. Micela to have lawfully engaged in the work done on the home, MPI’s license [or another licensed general residential MPI] was required because Mr. Micela, personally, is not able to engage in contracting without licensure because under A.R.S. § 32-1121(A)(5) he is disqualified. Identifying Parties to the Contract Respondent MPI asserts, arguendo, that MPI was not a party to the construction contract. MPI asserts it was not involved in the project at all. The evidence does not agree. At hearing, Complainant and Qualifying Party Denis Fallon testified that DW has had an ongoing business relationship with MPI for several years. This ongoing relationship is evidenced by an August 22, 2016 Written Jobsite Agreement between MPI and DW.[9] On January 15, 2018, Luigi Micela, owner and qualifying party for the MPI, sent DW an email[10] and a work order[11] soliciting DW to manufacture beams, interior doors, casing for doors and cased openings, base, jamb extensions for windows and the installation of all items. The scope of work also included DW’s purchasing and installation of door hardware. Lastly, the scope included the DW purchasing of specialty glass and installing that glass in a few existing customer doors and one newly manufactured door. Because MPI was an existing customer of DW, Mr. Fallon stated that DW not require a written contract. MPI’s January 15, 2018 email contained the following message:

We are working on [sic] project that we need some interior doors, casing, base and wood beams. I attached a basic list. If you are interest [sic] please call me so we can meet on site to walk it.

On the face of this e-mail, the solicitation for work was sent from MPI – not Mr. Micela personally - since MPI’s logo[12], business address, MPI’s email address (@micelaproperties.com) appears in the “from” line and the signature block identifies a website of MCI as the party soliciting the work. Mr. Micela is the president and qualifying party of MPI.[13] Because DW had years of previous dealings with MPI, a Mr. Micela had apparent authority to solicit DW for his company. A reasonable sub-MPI under these facts would not believe otherwise. No documentary evidence was presented to demonstrate Mr. Micela, rather than MPI, was soliciting for MPI services. Additionally, there is no reference in any communication that subject home was being built by Mr. Micela personally without the use of his contracting license. All communication was on MPI’s letterhead and under the MPI's signature. Moreover, Mr. Micela’s conduct is inconsistent with the contention that Mr. Micela, rather than MPI, was the contracting party with DW. On January 19, 2018, in response to the January 15, 2018 email solicitation, DW sent MPI estimates for the proposed work.[14] On January 25, 2018, MPI again emailed DW, stating: Do you have any room on a stronger price. I am having a hard time sale [sic] my client on it. Let me know what you can do. I want to get started. [emphasis added].[15]

Mr. Micela’s reference to a third-party in this e-mail as "my client" is inconsistent with the contention that Mr. Micela himself, rather than MPI, was the contracting party. This January 25, 2018 email was sent by MPI too. The email on its face in the signature block indicates it is mailed to DW from Micela Properties, Inc. since the email address, website and telephone numbers in the email all refer to MPI, not Mr. Micela personally. The Contract On January 19, 2018, in response to the solicitation from MPI, DW sent MPI its Estimates for the work ordered [the” Estimates”].[16] Upon having received and reviewed the Estimates, MPI sent its January 25, 2018 e-mail asking for the price in the Estimates to be reduced because MPI was having a "hard time" selling his "client" on the price.[17] MPI was aware that it was agreeing to the Estimates because MPI had them in hand and then tried to get a better price than that set forth in the Estimates. The conduct of both parties on this project tracked the requirements, terms and conditions of the DW Estimate. It is apparent that the parties intended to create a new agreement since the evidence did not show the parties followed or made any reference on this job to their August 22, 2016 Written Jobsite Agreement. To the contrary, the parties’ conduct as to payment amounts and draw schedule are consistent with the Estimate’s terms rather than the Written Jobsite Agreement. The Estimates provided the payment terms of "50% Down/50% Delivery." After the Estimates were sent out, DW sent invoices MPI as the work progressed.[18] The invoices follow the Estimates in both content and billing. The Estimates each provided that the payment terms were "50% Down/50% Delivery." This is exactly how the payments were made.[19] Since MPI was aware of the contents of the Estimates [because it was trying to negotiate a “strong price”], then the MPI also knew that the Estimates provided the payment terms of "50% Down/50% Delivery." which is just how payment occurred. The contract between MPI and DW is comprised of the Estimates.[20] Statute of Frauds MPI argues that as a matter of law, Arizona's Statute of Frauds bars any claim or enforcement of any agreement between DW and MPI for the sale of goods or products. Citing A.R.S. § 44-101(4) and Double AA Bldrs. v. Grand State Constr., 210 Ariz. 503, 114 P.3d 835 (App. 2005), MPI asserts no agreement is enforceable and a claim cannot be maintained if the cost of the goods is more than $500 unless there is an agreement in writing signed by the party to be charged. First, in this case the scope of work included not just a sale of goods or products. To the contrary, this agreement also included design and fabrication services, door installation and finish carpentry work, and glass installation on several doors. This agreement was not JUST for the sale of goods. Moreover, A.R.S. § 44-101(4) provides: No action shall be brought in any court in the following cases unless the promise or agreement upon which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged, or by some person by him thereunto lawfully authorized:…

4. Upon a contract to sell or a sale of goods or choses in action of the value of five hundred dollars or more, unless the buyer accepts part of the goods or choses in action, and actually receives them or gives something in earnest to bind the contract, or in part payment, …

It is not contested that MPI made payments to DW, which payments were made in conformity with the "50% Down/50% Delivery." Terms of the Estimates. A.R.S. § 44-101(4) therefore does not apply and the Estimates agreement is not barred by the Arizona Statue of Frauds. DW’s Right to Payment Through testimony of Denis Fallon, Complainant’s qualifying party, Mr. Micela requested a 10% discount and gave verbal approval to the parties’ agreement reflected by the Estimate when Mr. Fallon agreed to the discount. Evidence was admitted showing the total charges under the Estimate was $71,997.00.[21] On February 22, 2018, DW sought its initial 50% down per the terms of the Estimates Agreement.[22] On March 22, 2018, DW was paid a check for $35,000.00 by Mr. Micela.[23] Several payments were received that are also shown on DW Exhibit C-000047. DW’s accounting records reveal a balance of $9,211.00 is owed.[24] MPIs failure to pay this sum is asserted by MPI to constitute a violation of A.R.S. § 32-1154(A)(10). However, MPI’s mere failure to pay is not the end of the analysis here. Under the terms of the Estimates’ Agreement, DW is entitled to an initial payment of 50% down [accomplished on February 22, 2018[25]] and then the remainder payment [50%] is due upon delivery. It is not disputed that DW refused and has not yet delivered all of the items called for in the Estimate. The reason given by DW for not delivering was that MPI failed and refused to pay the final invoice from DW. The Arizona Prompt Pay Act[26] provides numerous benefits and protections for Contractors including a Contractor’s right to timely payment, 1.5% interest per month on unpaid invoices, and the right to stop work for nonpayment (after notice). There is no evidence of record to indicate that DW provided notice to MPI in compliance with the Prompt Pay Act or otherwise complied with Arizona’s Prompt Payment Act. Thus, DW cannot now claim a right to stop work [refuse to deliver or install] under the provisions and remedies provided by the Prompt Pay Act. DW’s remedy is a claims in Civil Court. DW’s remedy of withholding services or delivery of goods is not supported in law. MPI asserts that it was entitled to withhold payment for two reasons: a. First, MPI claims it is entitled to withhold payment to DW for work performed by DW that was below workmanship standards. At hearing, the Registrar’s Investigator, Jack Grimm, testified that in Registrar case number 2018A-3078, MPI filed a Complaint with the Registrar asserting DW’s poor and below standard workmanship for this same project. Mr. Grimm testified that he had conducted a job site inspection in follow-up to the Compliant and found no workmanship or other statutory violations. No Registrar’s Directive was issued and the case was closed. As argued by MPI in Respondent’s Post Hearing Memoranda: Because the ROC complaint for defective work was dismissed after the inspection, there can be no defense of defective work. The Contractor made the allegation of defective work to the ROC, and the ROC conducted an inspection. The results were that no corrective order was issued, no defective work was found, and the Contractor's complaint was closed. The Contractor cannot re-litigate a matter that has been conclusively ruled against him by the \ROC and its inspector Mr. Grimm.

In Arizona, [p]ublic policy dictates that there be an end to litigation; that those who have contested the issue shall be bound by the result of the contest; and that matters once tried shall be considered forever settled as between the parties.[27]

That the judgment was rendered by default does not affect its validity, for such a judgment admits as true all the material allegations properly set forth in the complaint and is just as binding and conclusive as to them as though it had been rendered after answer and contest.[28]

Therefore, the Registrar’s Decision in Case No. 2018A-3078 filed against MPI conclusively establishes for purposes of these proceedings that MPI did not violate workmanship standards and that question may not be re-litigated in this proceeding. The issue is res judicata. MPI is precluded from relying upon poor workmanship as a basis to withhold payment to DW. b. Secondly, MPI defends by contending that DW anticipatorily breached the Estimates Agreement by demanding MPI received full and final payment before it was due and, because it was not paid, DW stopped performing and has withheld doors and glass delivery and installation until it is paid. MPI’s counsel argues that Mr. Falon of DW reiterated his position during the job site investigation that he be paid before completing and delivering items. Mr. Fallon at the JSI is heard to say [contrary to the terms of Estimates Agreement] "When he pays us the $9100, we'll return the doors.[29] DW’s position is contrary to the specific conditions of the Estimates Agreement which provided payment in advance of 50% and then the remainder of the payment is due and collectable upon delivery of the manufactured items called for in the Estimates. The evidence is undisputed that DW did not and has not delivered the res called for in the Estimates Agreement. Therefore, by its own terms - in the Estimates Agreement drafted by DW - payment to DW is not yet due.[30] DW, having no legal bais upon which to refuse or delay delivery, payment is due when delivery of the specified res is accomplished and not before. CONCLUSIONS OF 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. ARIZ. ADMIN. CODE § R2-19-119. A preponderance of the evidence is:

The 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. Black’s Law Dictionary 1373 (10th ed. 2014). Statutes should be interpreted to provide a fair and sensible result. 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."). “Statutes shall be liberally construed to effect their objects and to promote justice.” A.R.S. § 1-211(B). The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). The preponderance of the evidence shows that DW has not delivered the items called for in the Estimates Agreement. As such, based on the contract, there is no amount “due” to DW within the meaning of Ariz. Rev. Stat. section 32-1154(A)(10). The preponderance of the evidence does not show that MPI violated Ariz. Rev. Stat section 32-1154(A)(10) as alleged.

RECOMMENDED ORDER

IT IS RECOMMENDED the Registrar order that the Citation and Complaint in Case No. 2018A-2512-ROC be dismissed. 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, November 28, 2018. /s/ Randy Wolfson Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] Administrative Judicial Notice is taken of the entirety of the ROC electronic and other files of the Registrar, including but not limited to the Registrar’s public website content.

[2] See, Agency Record, “Intake Complaint Submittal1.pdf.”

[3] § 32-1154(A)(10): 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:. . .(A)(10 Failure 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.

[4] Ibid. [5] Per a search of the information contained on the Registrar’s public website, the Registrar lists Mr. Micela as the owner, the qualifying party and the President of Micela Properties, Inc.

[6]A.R.S. § 32-1121(A)(5); (A.) This chapter shall not be construed to apply to: …. 5. Owners of property who improve such property or who build or improve structures or appurtenances on such property and who do the work themselves, with their own employees or with duly licensed contractors, if the structure, group of structures or appurtenances, including the improvements thereto, are intended for occupancy solely by the owner and are not intended for occupancy by members of the public as the owner's employees or business visitors and the structures or appurtenances are not intended for sale or for rent.…..

[7] A.R.S. § 32-1121(A)(5) provides an element required to be eligible for the statute’s licensing exemption- the property in question be owned by the person claiming the exemption.

[8] Respondent Exhibit R-2, “Warranty Deed.” [9] Respondent Exhibit R-7. [10] Complainant Exhibit 000043 [11] DW Exhibit C-000045 [12] This is the exact same logo for MPI that appears on MPI’s August 22, 2016 Written Jobsite Agreement between MPI and DW. [13] See, footnote 4, supra. [14] DW Exhibit C-000048 through 000055. [15] DW Exhibit C--000044. [16] DW Exhibits C-000048-000055, supra. [17] DW Exhibit C—000044, supra. [18] See, DW Exhibit C-000057-000072. [19] See, DW Exhibit C 000047 – a summary of all Estimates, Invoices and payments. [20] DW Exhibits C-000048-000055, supra. [21] See, DW Exhibits C-000057-000072 and the summary of invoices found at DW C- [22] Ibid. [23] Id. [24] Id. [25] Id. [26] A.R.S.§ 32-1129 and § 32-1129.01 through § 32-1129.07. [27] Lofts v. Superior Court, 140 Ariz. 407, 410, 682 P.2d 412, 415 (1984) (quoting Baldwin v. Iowa State Traveling Men’s Ass’n, 283 U.S. 522, 525, 51 S. Ct. 517, 518, 75 L. Ed. 1244 (1931)). [28] Collister v. Inter-State Fidelity Building and Loan Ass’n, 44 Ariz. 427, 435, 38 P.2d 626 (1934) (citations omitted). [29] Inspector. Recording. 33:17-33:21 & DW Exhibit C- 8. [30] DW also raised the issue whether the 2016 Job Site Agreement between the parties is illusory and unenforceable. This need not be addressed since the parties entered into a new agreement – the Estimates Agreement - pertaining to this project. The terms of the new agreement – as is detailed in the Estimates, serves to amend previous agreement. Because the new agreement provides for a 50% payment initially and the remaining 50% upon delivery and because DW withheld the custom made doors and glass payment is not due. The duty for MPI to make payment is not yet ripe.

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