ALJDEC decisions subject to certification as final

2018A-2571-NPC-ROC · Registrar of Contractors · 2018-10-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 17, 2018, 8:30 A.M. APPEARANCES: Complainant Jesus Leyva appeared on his own behalf; Kristina Matthews, Esq., appeared on behalf of Respondent ADMINISTRATIVE LAW JUDGE: Roger A. Geddes _____________________________________________________________________ FINDINGS OF FACT Background and Procedure 1. EGA Build & Design, LLC (Respondent), is the holder of License Number 317397 issued by the Registrar of Contractors (Registrar). 2. On or about June 6, 2018, Jesus Leyva (Complainant) filed a Complaint against Respondent with the Registrar alleging that Respondent owed Complainant the sum of $13,160.00. This amount represented a series of unpaid invoices, dated March 19, 2018, to April 6, 2018, relating to plumbing work performed by Complainant at various job sites of Respondent. 3. On June 18, 2018, the Registrar then issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) for the alleged failure by Respondent to pay monies in excess of $750.00 when due for materials or services rendered in connection with Respondent’s operations as a contractor. 4. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. The Registrar issued a Notice of Hearing setting a hearing for September 12, 2018, which was continued to September 17, 2018. At the hearing, Complainant testified on his own behalf and presented the testimony of Raul Leyva. Respondent presented the testimony of Samuel Cruz, owner. The Tribunal received and admitted Complainant’s exhibit numbers 1 - 2.[1] 5. Complainant testified that he performed the projects as requested by Respondent and Respondent refused to pay the invoices in the amount of $13,160.00 that were due upon completion. He stated That Respondent told him that the owner had not paid Respondent but that he was repeatedly told that he would be paid soon. He continued to complete the projects for Respondent based on the representations of payment but that no payment was forthcoming. He further testified that after he filed the subject Complainant, Respondent asked him for a certificate of insurance naming Respondent as an additional insured for the first time and that such a request had never been made before or during the projects. He stated that he would be willing to provide certificates of insurance if Respondent would pay the outstanding invoices. 6. Raul Leyva, Complainant’s son who works for the company, stated that the company never received a request for a certificate of insurance until after the subject Complaint was filed. 7. Samuel Cruz testified on behalf of Respondent that Respondent had an “informal” contract with Complainant. He stated that when they presented Complainant’s invoices to the owners of the properties, the owners requested certificates of insurance naming Respondent as additional insureds. As a result, he stated Respondent has not received payment from the owners and the owners have refused to release funds until certificates of insurance are provided. He admitted that he did not request certificates of insurance from Complainant until after Complainant’s work had been completed. 8. Mr. Cruz submitted that a contractor has seven days to pay a subcontractor once owner has paid. He argued that Respondent’s payment to Complainant is not due because Complainant has failed to provide certificate of insurance listing Respondent as additional insured. 9. Respondent asserted that there were back charges on two of the projects completed by Complainant but Respondent provided no evidence in that regard. 10. Respondent did not assert that it lacked the capacity to pay the amount Complainant contends is due. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119. 3. To warrant such sanctions by the Registrar, Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990). 4. 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.

5. Respondent argued in essence that payment to Complainant was not due because Complainant had failed to provide certificates of insurance for the work Complainant performed. The Tribunal finds that providing certificates of insurance by Complainant was not a condition precedent to payment to Complainant. The evidence was uncontradicted that Respondent did not request a certificate of insurance until after Complainant completed the work for which he now seeks payment. As there was no evidence of a written contract between the parties requiring Complainant to provide certificates or any other evidence of an obligation on the part of Complainant to provide certificates, the Tribunal finds that Complainant was not legally obligated to provide such certificates of insurance. Respondent presented no evidence that its contract with the owners of the residences required Respondent to provide certificates of insurance from its subcontractors. Even if there had been evidence of such, it was incumbent upon Respondent to inform Complainant of the certificate requirement at the time Complainant bid the projects so that it could have been included in the informal contract between Complainant and Respondent. Accordingly, the fact that Complainant did not provide certificates of insurance has no bearing on a determination as to when the amounts unpaid became due. 6. Respondent next argued that payment to Complainant was not due under the Arizona Prompt Pay Statute, A.R.S. § 32-1129 et. seq., because Respondent had not received payment from the owners for Complainant’s work. Specifically, Respondent cited to A.R.S. §32-1129.02(b) which states that a contractor is required to pay to its subcontractors within seven days of receipt by the contractor of each progress payment from the owner. It is open to question whether that statute stands for the proposition that a contractor need not pay a subcontractor if an owner in general withholds a progress payment. However, even if it did, Respondent failed to provide any persuasive evidence that the owners had in fact withheld payment merely because Complainant did not provide certificates of insurance. Specifically, Respondent failed to present any evidence of a written objection by the owners to Complainant’s invoices required under A.R.S. §32- 1129.01(d). Without such a written objection, Complainant’s invoices were deeded certified and approved as a matter of law. A.R.S. §32-1129.01(d). Further, in that Respondent chose to withhold approval of Complainant’s invoices, Respondent was required to have provided a written statement within fourteen days stating in reasonable detail the reasons for the withholding. A.R.S. §32-1129.02(e). There was no evidence presented of such a written statement. 7. Lastly, Respondent alluded to back charges relating to some of Complainant’s work. However, Respondent failed to specify the reasons for the back charges or provide any evidence to justify them. 8.. Accordingly, in this matter, the evidence supports a finding that Respondent failed to pay the amount of $13,160.00 to Complainant when due for materials or services rendered in connection with Respondent’s operations as a contractor. Complainant has established that Respondent’s license should be disciplined for a violation of A.R.S. § 32-1154(A)(10). RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of this Order, EGA Build & Design, LLC’s, License Number 317397 is suspended until the Registrar receives and accepts written verification that EGA Build & Design, LLC, has paid $13,160.00 to Jesus Leyva in certified funds. It is further recommended that if and when the Registrar receives and accepts J EGA Build & Design, LLC’s, evidence that it has paid Jesus Leyva $13,160.00 in certified funds, the Registrar may close the Complaint in Case No. 2018A-2571-NPC-ROC. In the event of certification of this 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 the certification. Done this day, October 9, 2018.

/s/ Roger Geddes______ Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] The Tribunal also took administrative notice of the Registrar’s file.

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