ALJDEC decisions subject to certification as final

2018A-4161-ROC · Registrar of Contractors · 2019-01-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 19, 2018, at 1:30 p.m. APPEARANCES: Demo Bodies LLC (“Complainant”) appeared through Kim Lindsey, its Office Manager; LRS Contracting LLC (“Respondent”) appeared through Gus T. Schultz, its Manager/Qualifying Party. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC304249 for General Dual KA Dual Engineering to Respondent. 2. Complainant is in the business of providing trucking and transport services, including moving dirt for contractors. 3. On or about September 4, 2018, Complainant filed a non-payment complaint with the Registrar against Respondent for failing to pay Complainant a total of $7,838.50 on a September 7, 2017 contract to move dirt from 11227 E. Prospect Point Drive to 33144 N. Northstar Cir. Complainant attached to the complaint invoice no. 23085 dated September 7, 2017, and numerous trip tickets detailing when the loads were delivered. 4. On September 20, 2018, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10). 5. On October 5, 2018, Respondent filed a timely written answer to the citation, stating in relevant part as follows: Our office has tried to have a face to face meeting with Jim Lindsey from Demo Bodies LLC to discuss the outstanding invoices and charges associated with the work completed. There are invoices that do not match our records, invoices for charges that do not pertain to our projects, and damages to structures and property of our customer that had to be repaired. Despite our attempts, we have not been able to facilitate a meeting place or time, and would appreciate any help that your office can be to bring a closure to this situation.

6. The Registrar referred the complaint to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 7. A hearing was held on December 19, 2018. Complainant appeared through its members, Jim Lindsey and Kim Lindsey. Mr. and Mrs. Lindsey both testified and submitted one exhibit on behalf of Complainant. Respondent appeared through its members, Gus T. Schultz (“Mr. Schultz”) and Cody Hatch, and employee, Dan Garrett. Mr. Schultz testified. Hearing Evidence 8. Mrs. Lindsey testified that Complainant has been working with Respondent since 2016. Respondent had always paid Complainant’s invoices before the one at issue. 9. Mrs. Lindsey testified that the work that Complainant invoiced was an hourly job that involved moving dirt to a lot on a hill to allow Respondent to construct a building pad. Mrs. Lindsey testified that the 19 trip tickets attached to the complaint showed that Complainant had made 19 trips between the two sites on September 6, 2017, and September 7, 2017. Ms. Lindsey testified that the travel time charged and total time was standard in the industry. 10. Many of the trip tickets were signed on behalf of Respondent by Drew Schultz, Mr. Shultz’s son. Mrs. Lindsey acknowledged that she did not know Drew Schultz, but stated that her husband Jim said that Drew was on the job. 11. Mrs. Lindsey testified that Complainant had never been invoiced from Respondent or contacted regarding any dispute to the invoiced amounts or collateral damage to Respondent’s customer’s property allegedly caused by moving the dirt. 12. Mr. Lindsey testified that because Complainant hired other trucking companies to transport the dirt, it had to spend its own money out-of-pocket to perform the work for Respondent. 13. Mr. Schultz challenged some of the trip tickets for allegedly charging a half-hour more than the time that was actually spent or the industry standard. Mr. and Mrs. Lindsey stated that Complainant would reduce the amount if Respondent would pay the rest. 14. Mrs. Lindsey testified that she knew that the general contractor had paid Respondent for the work. Mrs. Lindsey testified that the general contractor had asked Complainant to sign a lien release, but it refused to do so. Mrs. Lindsey stated that she did not know how Respondent had furnished lien release for Complainant’s work to the general contractor. 15. Mr. Schultz testified that the night before the hearing, he realized that most of the trip tickets that Complainant had attached to its complaint were fraudulent. 16. Mr. Schultz testified that he had never heard of the address on E. Prospect Point. Mr. Schultz testified that Respondent was in the process of going over all Complainant’s invoices since 2016 because it believed that Complainant’s alleged fraud was ongoing. 17. Mr. Schultz testified that his son, Drew, embarked on a mission in October 2018, the month before the hearing in this matter. Mr. Schultz implied that he suspected that Complainant had forged Drew’s signature on the trip tickets because it knew that Drew would not be available to testify at the hearing. Mr. Schultz testified that Drew’s handwriting was poor and that the signatures attributed to him did not look the same. No handwriting expert analyzed the signatures or testified. 18. Mr. and Mrs. Lindsey appeared genuinely shocked by Mr. Schultz’s accusation of fraud. Nowhere in the record did Respondent mention fraud until the hearing. 19. Pursuant to A.A.C. R4-9-117, administrative notice is taken of Respondent’s license history on the Registrar’s public website on this date. Respondent’s license is current and in good standing. No discipline has ever before been taken against the license. Complainant’s is apparently the only complaint pending against the license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] 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.”[5] A.R.S. § 32-1154(A)(10) includes among the grounds for suspension or revocation 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.” Complainant made a prima facie showing that Respondent owes Complainant $7,838.50 for services that Complainant rendered in connection with Respondent’s operations as a licensed contractor. Fraud in legal proceedings is a serious allegation. In civil actions, fraud is an affirmative defense that must be asserted in the written answer or be deemed to have been waived.[6] Although the usual standard of proof in civil actions is a preponderance of the evidence, because of the potential damage to a person’s reputation, fraud must be established by clear and convincing evidence.[7] Complainant filed the complaint for non-payment with the Registrar almost a year after it issued invoice no. 23085 to Respondent. Respondent’s written answer was filed another month after that, but alleged merely that it did not agree with the total amount, not that Complainant had not performed any work and had, instead, forged the trip tickets to support a fraudulent invoice. Mr. Schultz testimony that he did not realize until more than two more months had passed that Complainant had engaged in wholesale fraud against Respondent over two years of transactions was not credible. Respondent did not establish by a preponderance of the evidence, much less by clear and convincing evidence, that Complainant’s invoice was fraudulent. Based on the foregoing, Complainant established that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant $7,838.50. RECOMMENDED ORDER Based on the foregoing, it is ordered that thirty days after the effective date of the final order in this matter, Respondent LRS Constracting LLC’s License No. ROC304249 shall be suspended until Respondent pays $7,838.50 to Complainant Demo Bodies LLC. It is further ordered that if on or before thirty days after the effective date of the final order, the Registrar receives written proof from Respondent that is satisfactory to the Registrar that Respondent has paid Complainant $7,838.50 by certified or cashier’s check, the Registrar not suspend Respondent’s license but, instead, close Case No. 2018-4161. 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 7, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See 32-1101 et seq. [2] 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). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] Black’s Law Dictionary at page 1220 (8th ed. 1999). [6] See Ariz. R. Civ. P. 8(c)(1)(H). [7] See, e.g., American Pepper Supply Company v. Federal Insurance Company, 205 Ariz. 465, 468 ¶ 12, 72 P.3d 1284, 1287 (App. 2003) (citations omitted).

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