ALJDEC decisions subject to certification as final

2019A-00357-ROC · Registrar of Contractors · 2019-05-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 24, 2019, at 9:00 a.m. APPEARANCES: Westgate Enterprises LLC (“Complainant”) appeared through Jeannette Stevens, its member; Octane Design, LLC DBA: Copper St Construction & Design (“Respondent”) appeared through Nick Jevnikar, its member/qualifying party. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. On or about March 17, 2008, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC 243055 for Specialty Dual CR- Electrical contracting to Complainant. 2. On or about November 25, 2013, the Registrar issued License No. ROC 287495 for General Dual KB-2 Dual Residential and Small Commercial contracting to Respondent. 3. On January 22, 2019, January 25, 2019, and January 30, 2019, Complainant filed complaints against Respondent with the Registrar that alleged that Respondent owed Complainant $4,604.00 pursuant to a subcontract to perform electrical work at a commercial project at 2724 W. Carver Rd., Laveen, Arizona 85339. 4. On February 1, 2019, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent’s license. 5. Respondent filed a timely written answer to the Citation, stating that Complainant’s complaints constituted “extortion” after Complainant refused to perform warranty work, causing Respondent to withhold the final payment. 6. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 7. A hearing was held on April 24, 2019. Complainant submitted six exhibits and presented the testimony of Jeanette Stevens, its member and office manager, and James Stevens, Sr., its qualifying party/member. Respondent submitted four exhibits and presented the testimony of Nick Jevnikar, its qualifying party/member. Hearing Evidence 8. On or about July 17, 2018, Respondent entered into a subcontract with Complainant for electrical work on the project on Laveen. The initial contract amount was $29,150.00. Mutually approved change orders in the amounts of $549.00, $645.00, $100.00, and $345.00 were subsequently issued, raising the contract price to $30,839.04. 9. Complainant requested a joint check agreement with its electrical supplier, International Electrical Supply (“IES”) so that it could order supplies for the project. Mr. Jevnikar testified that, although Respondent did not agree to pay for Complainant’s materials in advance, Complainant’s cash flow caused it to order materials late and to perform work late. As a result, Respondent was forced to have its drywall subcontractor perform work before Complainant completed its work, which caused Respondent to impose a back charge of $713.00 against Complainant for drywall repairs after Complainant installed lights. 10. In the third week of October, Respondent paid Complainant $14,575.00. Ms. Stevens testified that the payment was 60 days past due. Complainant did not have IES negotiate the check. 11. On or about December 9, 2018, Complainant submitted a change order in the amount of $775.00 for additional signs and relocated outlets, which Ms. Stevens testified was caused by the property owner’s change to the hallway. 12. Respondent did not approve the change order. Mr. Jevnikar testified that the changes were caused by Complainant’s untimely performance of its subcontract. 13. On or about December 10, 2018, Respondent sent an email to Complainant, informing it that the project had failed the final electrical inspection a second time.[1] 14. On or about December 10, 2018, Respondent sent its subcontractors a final punch list for their scope of work. Complainant’s list had eleven items. Ms. Stevens testified that two of the items would require a change order, three of the items had been taken care of, and the remaining six items were cosmetic items that would cost about $300.00 to repair. Ms. Stevens testified that, on principle, Complainant did not repair the punch list item because Respondent had been late in making payments and still owed Complainant money. 15. On or about January 10, 2019. Respondent sent Complainant a check for $11,660.00, which it eventually cashed. Respondent sent Complainant several emails asking when the punch list items would be completed, but Complainant did not respond to the emails. 16. On or about January 14, 2019, Respondent sent Complainant a third and final deficiency notice, informing Complainant that Respondent would hire a new electrical subcontractor to complete Complainant’s work if it did not return to the jobsite. 17. On or about January 24, 2019, Respondent hired Madyson Electric to repair the punch list item. When Madyson Electric performed the repairs, it noticed that the time clock was not working correctly. Respondent submitted into evidence a video of the time clock that Madyson Electric had taken. 18. Mr. Stevens acknowledged that the video showed that the time clock was not working correctly, but testified that the time clock was working correctly when Complainant left the jobsite and that the time clock had passed inspections. Mr. Stevens testified that Respondent’s new electrician must have sabotaged the time clock. 19. Mr. Jevnikar testified Madyson Electric would not jeopardize its license by committing fraud. Respondent paid Madyson Electric $1,476.06 to repair the punch list items and the time clock. Respondent made a deductive change order in this amount against the money it still owed Complainant. 20. Mr. Jevnikar testified that Respondent still owed Complainant $1,889.94 and that he had issued a check to Complainant in this amount, but that Complainant had not yet cashed the check. 21. Complainant disputed the $713.00 and $1,476.06 back charges. CONCLUSIONS OF LAW 1. This matter lies with the Registrar’s jurisdiction.[2] 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.[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] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[5] 3. A subcontractor that refuses to perform a punch list until it is paid in full does so at its peril. Complainant could have performed the repairs required by the punch list and could have inspected the time clock at that time. 4. Fraud in legal proceedings is a serious allegation. Although the usual standard of proof in administrative proceedings is a preponderance of the evidence, as noted above, because of the potential damage to a person’s reputation, fraud must be established by clear and convincing evidence.[6] Complainant did not establish that Respondent or the electrical subcontractor that it was forced to hire after Complainant refused to perform punch list repairs sabotaged the time clock. 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.” Respondent did not allege that the owner of the project failed to pay Respondent. 6. Complainant did not establish that either of the back charges were not legitimate. Respondent has tendered $1,889.94 to Complainant, but Complainant has refused to cash the check. Therefore, Complainant did not establish cause to suspend or revoke Respondent’s license under A.R.S. § 32-1154(A)(10). RECOMMENDED ORDER In view of the foregoing, it is ordered that, on the effective date of the order in this matter, the Registrar dismiss Complainant Westgate Enterprises LLC’s complaint in Case No. 2019-00357 against Respondent Octane Design LLC DBA: Copper St Construction & Design’s License No. ROC 287495. 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, May 7, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See Exhibit B-2. [2] See A.R.S. § 32-1104(A)(4). [3] 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). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] See A.A.C. R2-19-119(B)(2). [6] 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