ALJDEC decisions subject to certification as final

2019A-00163-ROC · Registrar of Contractors · 2019-04-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 14, 2019 at 8:30 AM.[1] APPEARANCES: James Anthony Zane III appeared on behalf of Arizona Wall, Inc. (“Complainant”). Brian Houston appeared on behalf of MIO Specialty Contractors, LLC (“Respondent”). Ben Zane, Robyn Barinston, Brian Sherrill, and Janet Sherrill 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 license file as shown on the Registrar’s public website March 14, 2019. On November 09, 2017, the Registrar issued License No. 315229 for B-1 General Commercial contracting license to Respondent.[2] The license is renewed through September 30, 2019.[3] Brian Jeffrey Houston is listed as the Qualifying Party/Member on the license.[4] The address of record for the license is 3217 E Shea Blvd Ste. 211, Phoenix, Arizona 85028-3381.[5] There is an active surety bond listed for the license effective August 03, 2017, for $5,000.00 through Merchant’s Bonding Company.[6] There is are no prior disciplinary actions listed against the license. However, there are four open cases on the license – one of which is presumed to be Complainant’s. The license is listed as active. 2. On January 10, 2019, the Registrar received a complaint from Complainant alleging nonpayment of services and/or materials against Respondent.[7] The Registrar designated it Complaint No. 2019-00163 and assigned the case to Lovilia “Lovey” Martinez in their legal department. 3. On January 22, 2019, 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 January 29, 2019.[8] 4. Respondent did not supply any information to the Registrar regarding Complaint No. 2019-00163 by January 29, 2019. 5. On February 01, 2019, the Registrar issued a Citation to Respondent for an alleged violation of Ariz. Rev. Stat § 32- 1154(A)(10).[9] Respondent was notified that a failure to provide an Answer by February 19, 2019, 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.[10] 6. Respondent submitted a timely Answer to the Registrar. 7. On February 11, 2019, the Registrar issued a Notice of Hearing setting the above-captioned matter for hearing at 1:00 p.m. on October 29, 2018, at the Office of Administrative Hearings, an independent state agency. The Notice of Hearing informed the parties that the hearing was being conducted on the charges made in the Citation and Complaint. HEARING EVIDENCE 8. James Zane appeared on behalf of Complainant as a witness and submitted six exhibits. Brian Houston appeared on behalf of Respondent and submitted five exhibits. The NOTICE OF HEARING and Registrar’s electronic file were admitted into the record as exhibits. James Zane’s testimony 9. Mr. Zane testified that he has been employed by Complainant as a General Manager for the past fifteen years. 10. Regarding Complaint 2019-00163, Mr. Zane testified that the parties entered into a fixed-price contract whereby Respondent agreed to pay Complainant $40,750.00 in exchange for its subcontracting services.[11] Billing was monthly and payment was due ten days past receipt. Mr. Zane testified that Respondent hired Complainant as a metal framing and drywall sheathing subcontractor for the underlying commercial construction project. The parties did not have a prior professional relationship before this project commenced. 11. The project started on April 11, 2018. Complainant’s work on the project finished in December 2018. 12. On November 28, 2018, Complainant notified Respondent of its intent to place a lien on the project.[12] Respondent replied that monies would be remitted on or about December 03, 2018.[13]

13. Per Mr. Zane, he filed his complaint with the Registrar on January 07, 2019, because Complainant had not received payment on the contracting project for several months. Specifically, Mr. Zane testified that the only payment Respondent made was for $35,024.72 on July 26, 2018[14], and that Respondent failed to remit payments for invoices issued for $3,105.00 on July 19, 2018, $4,293.00 on August 17, 2018[15], $5,943.60 on September 12, 2018[16], and $5,374.00 on November 19, 2018.[17] Mr. Zane testified that Respondent alleged that the Landlord/Owner of the commercial property site failed to pay him so he was therefore unable to pay any subcontractors, but Complainant had information from Landlord/Owner that directly contradicted Respondent.[18] 14. Mr. Zane testified that he obtained payment certifications and receipts from Landlord/Owner which establish Respondent was paid approximately $453,095.64 for the project. Specifically, Complainant provided documentation which showed Landlord/Owner paid Respondent $31,000.00 on March 14, 2018, $34,546.39 on May 21, 2018, $45,000.00 on June 22, 2018, $75,511.64 on July 24, 2018, $64,634.22 on August 31, 2018, and $111,029.41 on December 15, 2018.[19] Mr. Zane testified that Landlord/Owner also made payments to Respondent for $42,064.76 on April 21, 2018, and for $49,309.22 on September 27, 2018. 15. Mr. Zane further testified that on November 14, 2018, Respondent signed a release on final payment which confirmed that Respondent had been paid in full for the project.[20] 16. At the time Complainant filed its complaint with the Registrar it was alleged that Respondent owed payment for five invoices totaling $18,715.60. Mr. Zane testified that after the complaint was filed, but prior to the hearing date, Complainant entered into an agreement with Landlord/Owner of the commercial property site for the total amount allegedly owed by Respondent, to release the lien Complainant had placed on the property. Per Mr. Zane, Complainant offered a 10% discount on the total amount owed, which left an outstanding balance of $2,322.53.[21] Brian Houston’s testimony 17. Mr. Houston testified that he is the Qualifying Party/Member on Respondent’s license. 18. Mr. Houston testified that Respondent and Complainant signed a $40,750.00 Net-30 contract in April of 2018 whereby Respondent agreed to make progress payments Complainant after it received its own payments from Landlord/Owner. 19. Regarding the invoices at issue, Mr. Houston testified that the invoices were duly sent to Respondent, were due, and agreed that they had not been paid. Per Mr. Houston, however, the invoices were for change orders that Landlord/Owner failed to sign, which in turn resulted in Landlord/Owner ceasing payments to Respondent, which ultimately left Respondent unable to pay Complainant. 20. Mr. Houston denied that he ever received monies from Landlord/Owner as payment remitted for the invoices, and had tried on at least two separate occasions to try and obtain payment from Landlord/Owner. Specifically, Mr. Houston provided a lengthy email from Landlord/Owner dated December 28, 2018, which reads, in pertinent parts, as follows: “We already paid you the final payment of $97,807.40 for the final G702 application for payment. This included the $52,067 in change orders. You never even brought these change orders to me for my approval prior to the changes and I didn't sign any of them. That said, I trusted you that the change orders were legit and agreed to pay them. And we did. We even paid you the additional $13,222 for permit reimbursements. I was counting on this project staying on the original contract amount of $386,912.64. We ended up paying you a total of $453,095.63. At this point, MIO needs to get these subs paid. If you misused the money we paid you for the job, or somehow miscalculated how much you owed subs.....that is on you. Not me. You guys need to figure out how to get these people paid off as soon as humanly possible. Please do the right thing and get the subs paid so they don't place liens on the property. PLEASE figure out a way to get these subs all paid. We [cannot] have liens on this property.”[22] (Emphasis in original).

21. Mr. Houston further testified that Respondent was not paid by Landlord/Owner in October or November of 2018, and that they last payment received from Landlord/Owner was on September 12, 2018. Mr. Houston argued that the invoice for $4,293.00 as issued on August 17, 2018, is the only invoice in dispute.

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.[23] 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.[24] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[25] 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.”[26] 4. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.[27] 5. Statutes should be interpreted to provide a fair and sensible result.[28] Statutes shall be liberally construed to affect their objects and to promote justice.[29] 6. 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.” 7. The material facts in this case are clear. 8. Here, credible evidence in the record reflects that Complainant sent Respondent four invoices totaling $18,715.60 for work completed pursuant to change orders on the underlying project, and that Respondent failed to obtain the necessary signature(s) to authorize payment for said invoices. 9. The fact that Complainant entered into an agreement to remove a lien on the underlying project site in exchange for a majority of the outstanding monies owed by Respondent to be paid by a third party, does not relieve Respondent of its financial obligation to Complainant. Per the record, Respondent owes an outstanding balance of $2,322.53 to Complainant which would make Complainant whole. 10. Notably, Respondent has not proven by a preponderance of the evidence that it did not receive all monies owed by Landlord/Owner to pay Complainant monies it owed. Nor did Respondent provide evidence of insolvency. Therefore, Respondent has failed to establish an affirmative defense under Ariz. Rev. Stat. § 32-1154(A)(10). 11. The undersigned Administrative Law Judge therefore holds 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. 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, Respondent’s Contractor’s License No. 315229 be suspended for three (3) business days. IT IS FURTHER RECOMMENDED that the Registrar revoke Respondent’s license unless the Registrar receives sufficient proof that Respondent has tendered $2,322.53 in certified funds to Complainant on or before thirty days after the effective date of the Final Order in this matter. If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be five days from the date of certification. Done this day, April 03, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The parties stipulated on the record to hold the matter open for one additional week, to allow the undersigned Administrative Law Judge additional time to review their documentation and issue the underlying Recommended Order. [2] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACWVWEA5. [3] Id. [4] Id. [5] Id. [6] Id. [7] See Electronic File, page 10. [8] See Electronic File, page 36. [9] See Electronic File, pages 04-09. [10] Id. [11] See Electronic File, pages 18-24. [12] See Complainant Exhibit 4. [13] Id. [14] See Complainant Exhibit 6. [15] Approved Respondent change orders. See Complainant Exhibit 2 [16] Id. [17] See Electronic File, pages 12-17. [18] See Complainant Exhibit 5. [19] See Complainant Exhibit 7. [20] See Complainant Exhibit 9. [21] Amount includes taxes and fees. [22] See Respondent Exhibit A. [23] See Ariz. Rev. Stat. §§ 32-1101 et seq., 32-1154(A), and 41-1092 et seq. [24] See Ariz. Admin. Code R2-19-119. [25] MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). [26] BLACK’S LAW DICTIONARY at page 1220 (8th ed. 1999). [27] See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). [28] 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.”). [29] 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