ALJDEC decisions subject to certification as final

2019A-00285-ROC · Registrar of Contractors · 2019-06-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 24, 2019, at 8:30 a.m. APPEARANCES: Extreme Welding & Fabrication LLC (“Complainant”) appeared through its member/qualifying party, William Brown; JIC Contracting LLC (“Respondent”) was represented by Craig W. Broadbent, Esq., Zazueta & Broadbent, PLLC. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. The Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC 268386 for Specialty Dual CR-24 Ornamental Metals to Complainant on October 1, 2010. The Registrar issued License No. ROC 301069 for Specialty Dual CR-17 Steel and Aluminum Erection to Complainant on September 11, 2015. Complainant’s member/qualifying party is William Brown. 2. The Registrar issued License No. ROC 316317 for Specialty Dual CR-11 Electrical to Respondent on November 21, 2017. Respondent’s member/qualifying party is Jovan Isailovic. 3. On January 16, 2019, Complainant filed a complaint against Respondent with the Registrar that alleged that Respondent owed an outstanding balance of $22,668.00 for work that Complainant had performed at a commercial project. 4. Complainant attached to its complaint a narrative signed by Mr. Brown, in relevant part as follows: On approximately 8/22/18, I entered into a verbal contract with Mike March of Moderna Architects . . . . We discussed my assistance with structural steel for a patio project for K O’Donnells, in Scottsdale. We verbally negotiated the project price and agreed upon terms with a handshake. A written contract was not provided by the Contractor.

The agreed upon payment schedule with Mike March, was to be an initial deposit of $15,000.00 (which I received) with the final payment to be paid in full upon completion of project. I was later informed that a general contractor, Jovan Isailovic, JIC Contracting ROC 316317 would be paying me for my work. I received subsequent draws of $10,000 and $5,000. All payments were to be made to Extreme Welding, LLC.

All work was completed on 11/14/18 with an outstanding balance owed me of $22,668.00. I was unable to reach Jovan to secure my final payment. . . .

After unsuccessful attempts to reach Jovan, I reached out to the owner of K O’Donnells, Jennifer O’Donnell. I was advised that Jovan had been paid in full and had presented them with a forged lien [waiver] with my signature. I never completed this document. See attached copy of forged document. I later discovered that Jovan is not a licensed general contractor.

To date I have not been paid. . . .[1]

5. On January 30, 2019, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent’s license.[2]

6. Respondent filed a written answer to the Citation, denying that it owed Complainant any money and affirmatively alleging that it was looking for an attorney to file suit against K. O’Donnells in court.[3] 7. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 8. A hearing was held on May 24, 2019. Mr. Brown testified on behalf of Complainant and called the Administrative Law Judge’s (“ALJ’s”) attention to previously submitted documents. Mr. Isailovic testified on behalf of Respondent and called the ALJ’s attention to previously submitted documents. Hearing Evidence 9. The project involved renovations and updates to K. O’Donnells sports bar in Scottsdale. Complainant provided structural steel and rolled roofing for the outdoor patio. Complainant provided electrical work, especially for wall-mounted large televisions, on the patio and the interior of the bar. The bar was owned by Jennifer O’Donnell and her father, Kevin. 10. At first, architect Mike Marsh was the owner’s representative for the project. Complainant negotiated with Mr. March to reach a verbal agreement on the work it would perform and the cost of the work. Mr. March was on site to supervise workers but, at some point, architect Don Andrews took over as the owner’s representative on the project. 11. Mr. Brown testified consistently with the letter attached to the complaint. He initially contracted with Mr. March. Mr. Brown did not allege that Complainant ever negotiated with Respondent regarding the original contract or change orders that increased the contract price. Mr. Brown did not allege that Respondent supervised Complainant’s work on the project. 12. Complainant originally bid the job at $40,000.00, with $15,000.00 to start the job. Subsequently, change orders raised the cost of the job to $52,668.00.[4] 13. At some point, Mr. March instructed Complainant that it should submit its invoices to Respondent and instructed Respondent that it should include the cost of Complainant’s work in the invoices that it submitted to Mr. March and/or the owner, Ms. O’Donnell. 14. Complainant submitted its invoices to Respondent. Respondent paid Complainant a total of $30,000.00. The record does not reflect that Complainant was required to sign lien waivers as a condition of receiving the initial payments. Mr. Isailovic testified that he never prepared any lien waivers for Complainant. 15. Mr. Isailovic testified that Respondent was brought into the project because he and his family rented a house that Mr. March owned. Mr. March had prepared plans to update and improve the bar because it was very outdated. Ms. O’Donnell said work had to be done at night because the bar needed to stay open. 16. Mr. Isailovic testified that Ms. O’Donnell’s condition eliminated most contractors because they were not willing to work at night and to take special measures to protect bar patrons who would be coming into the bar during the day. Mr. Isailovic testified that, in addition, Mr. March’s plans contained many errors, which led to change orders and cost overruns, even though the city had approved the plans. 17. Mr. Isailovic testified that he brought Terra Bello Land Design (“Terra Bello”) and JMAC Heating and Cooling (“JMAC”), which performed HVAC work, into the project because he had worked with them both in the past. Mr. Isailovic testified that he included Terra Bello’s and JMAC’s invoices in Respondent’s invoices because he had brought those subcontractors onto the project. 18. Mr. Isailovic testified that he never met Mr. Brown until October 2018, when Mr. March introduced him at the K. O’Donnells project. 19. The K. O’Donnells project was substantially complete in early November 2018. On November 16, 2018, Complainant submitted to Respondent, Mr. March, and/or Mr. Andrews a final invoice in the amount of $22,668.00.[5] 20. On November 19, 2018, Respondent submitted a final invoice to Ms. O’Donnell in the amount of $72,723.40.[6] Complainant did not call the Administrative Law Judge’s attention to any of its work on Respondent’s final invoice to the owner. 21. After Complainant was not paid for its final invoice, Mr. Brown sent emails to Ms. O’Donnell, Mr. March, and Mr. Andrews.[7] All three alleged that all subcontractors had been paid for the job. 22. Finally, on December 18, 2018, Mr. Andrews provided all lien waivers that purportedly had been supplied to Ms. O’Donnell by Mr. Isailovic, including an Unconditional Waiver and Release upon Payment for “100% + change orders” on the K. O’Donnells project, purportedly signed by Mr. Brown on behalf of Complainant on November 21, 2018.[8] Mr. Brown denied ever signing the lien waiver, alleging it was a forgery. 23. Mr. Isailovic testified that Mr. March coached him how to prepare invoices and lien waivers. Mr. Isailovic denied that Respondent had been paid for Complainant’s work or that he had prepared the November 21, 2018 lien waiver that bore Mr. Brown’s purported signature. 24. Mr. Isailovic acknowledged that he had prepared lien waivers dated November 21, 2018, for the “Jennifer O’Donnell/K O’Donnells” project for Terra Bello for “100% . . . of estimate,” JMAC for “100% payment in full,” and for Respondent in the amounts of $33,090.85, $195,216.15, and “75% paid – 25% left + change order.”[9] Mr. Isailovic testified that Respondent billed and paid for Terra Bello’s and JMAC’s work because he had brought them onto the project. Mr. Isailovic testified that Respondent’s final invoice did not charge anything for Complainant’s work and that it was not paid anything for Complainant’s final invoice. 25. Respondent also submitted an unsigned, undated lien waiver for Respondent in the amount of $29,531.50.[10] Mr. Isailovic testified that Respondent was owed close to $50,000.00 for the electrical work that it had performed in the interior of K. O’Donnells and that it was still owed $72,723.40 for its final invoice. Mr. Isailovic testified that Respondent would be suing K. O’Donnells in court to get final payment. / / / / CONCLUSIONS OF LAW 1. This matter lies with the Registrar’s jurisdiction.[11] 2. Complainant bears the burden of proof to establish cause to suspend or revoke Respondent’s contractor’s license by a preponderance of the evidence.[12] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[13]“ 3. A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[14] 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.”[15] 4. 5. A.R.S. § 32-1154(A)(10) includes among the grounds to suspend or revoke a contractor’s license “[f]ailure by 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.” A contractor’s inability to pay and non-payment by the owner or general contractor on a project are affirmative defenses that the respondent contractor bears the burden to establish in a subcontractor’s complaint for failure to pay. 6. Mr. Brown acknowledges that Complainant did not have a subcontract with Respondent for the K. O’Donnells project. Mr. Brown acknowledges that Respondent did not supervise Complainant’s work or mediate between Complainant and the owner or the owner’s representative. Mr. Isailovic acknowledges that Respondent was paid $30,000.00 for Complainant’s work and paid that amount to Complainant as instructed by the owner’s representative. 7. Mr. Isailovic consistently stated and credibly testified that Respondent has not been paid for the last $22,668.00 that Complainant is owed on the project and that Respondent had not been paid in full for its work on the project. Complainant has not provided any financial records to indicate otherwise. No handwriting expert has opined on the origin of the various lien waivers. The sole basis for the Registrar to hold Respondent liable for failing to pay Complainant is Mr. Andrews’ statement in the December 18, 2018 email to Mr. Brown that Respondent had been paid for Complainant’s work and that Mr. Isailovic had submitted a lien waiver for the final payment purportedly signed by Mr. Brown. 8. Mr. Andrews’ statement on the December 18, 2018 email is hearsay.[16] Although hearsay may be admitted in an administrative hearing,[17] it should not be relied upon if it is not the kind of evidence that reasonable persons would rely upon in serious matters.[18] Mr. Andrews and Ms. O’Donnell would appear to have motivation of their own to take action to avoid paying contractors for their work on the job. 9. There is not contract between Respondent and Complainant that would have required Respondent to pay Complainant anything if it has the capacity to do so. On this evidence, Complainant has not established that Respondent has received any payment from the owner of K. O’Donnells or her representative for Complainant’s final invoice, that Mr. Isailovic forged the final lien waiver that Mr. Andrews provided to Mr. Brown to avoid paying Complainant, or that Respondent owes Complainant more than $750.00 for the K. O’Donnells project. / / / / RECOMMENDED ORDER In view of the foregoing, it is ordered that, on the effective date of the order in this matter, Complainant Extreme Welding & Fabrication, LLC’s complaint in Case No. 2019-00285 against Respondent JIC Contracting LLC’s License No. ROC 316317. 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, June 10, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] The Registrar’s electronic file at pdf page 62. [2] Id. at pdf pages 51-56. [3] See id. at pdf page 57. [4] See id. at pdf page 22 -23. [5] See id. at 22. [6] See Respondent’s disclosed exhibit at JIC023 – JIC033. [7] See id. at 79-86. [8] See id. at 24, 87. [9] See Respondent’s disclosure at JIC066, JIC067, JIC0068, JIC069, JIC070. [10] See Respondent’s disclosure at JIC065. [11] See A.R.S. § 32-1104(A)(4). [12] See A.A.C. R2-19-119(A) and (B)(1); see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996). [13] See A.A.C. R2-19-119(B)(2). [14] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [15] Black’s Law Dictionary at page 1220 (8th ed. 1999). [16] See Ariz. R. Evid. 801(c) (“‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”). [17] See A.R.S. § 41-1092.07(F)(1). [18] See Plowman v. Arizona State Liquor Board, 152 Ariz. 331, 337, 732 P.2d 222, 228 (App. 1986) (citing Begay v. Arizona Department of Economic Security, 128 Ariz. 407, 626 P.2d 137 (App. 1981)).

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