ALJDEC decisions subject to certification as final

2019A-03286-NPC-ROC · Registrar of Contractors · 2019-10-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 23, 2019 at 9:00 AM. APPEARANCES: Edward Marko, Esq. appeared on behalf of R E Michel Company LLC (“Complainant”) with Guillermo Valdez as a witness. Richard Elley, Esq. appeared on behalf of A Team Air Conditioning and Heating Inc. (“Respondent”) with Orlando Galvez as a witness. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Arizona Registrar of Contractors (“Registrar”). FINDINGS OF FACT Background and Procedure 1. On August 09, 2005, the Registrar issued License No. 209745 for specialty dual CR-39 air conditioning and refrigeration contracting to Respondent.[1] Respondent’s address of record for the license is 2916 N. 35th Ave. Ste. 7. Phoenix, Arizona 85017-5264. Orlando Galvez- Borbon is listed on the license as the Qualifying Party.[2] 2. Pursuant to Ariz. Admin. Code R4-9-117, Administrative Notice is taken of Respondent’s prior License record for License No. 209745, as reflected on the Registrar’s public website on September 23, 2019. Such prior license record reflects that Respondent’s license is active.[3] There is one prior discipline listed for the license.[4] The record shows that there is one open complaint against Respondent’s license, which is presumed to be related to this matter. Respondent has a $6,750.00 surety bond issued through RLI Insurance Company effective April 29, 2015.[5] Per the Registrar’s website, there have been no payments issued from the bond. 3. Complainant operates a commercial hardware and supply store. Patrons of Complainant’s store must be members in order to make a purchase. Member accounts are setup by Complainant, and include a list of all employees permitted to make a purchase on a member’s account. 4. Respondent has a member account with Complainant’s store. 5. On June 24, 2019, the Registrar received a complaint from Complainant alleging non-payment of services and/or materials against Respondent for twenty-one outstanding purchase invoices totaling $4,304.46.[6] 6. On July 02, 2019, the Registrar issued a Non-Payment Complaint Notification Letter to the parties, advising that Respondent could supply any affirmative defenses or raise other issues to the Registrar by July 09, 2019.[7] 7. On August 02, 2019, the Registrar referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on September 23, 2019. Per the Notice of Hearing[8] issued on August 06, 2019, the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charges: Charge 1: A violation of A.R.S. § 32-1154(A)(10) (“Failure 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.”).[9]

Hearing Evidence 8. Complainant called branch manager Guillermo Valdez as a witness and submitted four exhibits into the record. Respondent called Orlando Galvez as a witness. The Registrar’s electronic hearing file and Notice of Hearing were also admitted into the record as their own exhibits. 9. Mr. Valdez testified that he does not have firsthand knowledge regarding Respondent’s account with Complainant’s store, but was advised by his company’s corporate headquarters that Respondent’s account was past due in the amount of $4,304.46 plus late fees. 10. Per Mr. Valdez, store associates are tasked with familiarizing themselves with customer accounts and only permitting authorized users to make purchases. Mr. Valdez was unable to provide any information regarding who, besides Mr. Galvaz, was authorized to use Respondent’s account. Mr. Valdez alleged that several individuals bearing Respondent’s uniform and insignia made multiple purchases on Respondent’s account. Mr. Valdez could not, however, affirmatively state whether any of these unnamed individuals had written or otherwise express permission from Respondent to make any of the purchases that were allowed by Complainant’s store associates, or that any of these individuals were named on Respondent’s account as authorized users at the time the purchases at issue were made. 11. Mr. Valez testified that, per corporate policy, after Respondent’s account was in arrears charges were still permitted to be made up to the credit limit. 12. The only employee permitted to make a purchase on Respondent’s account is Mr. Galvez. 13. Mr. Galvaz admitted that he owed $1,650.18 for three of Complainant’s invoices, but denied purchasing or authorizing the purchases in all other invoices at issue. Specifically, Mr. Galvaz admitted to owing Complainant $1,405.18 for Invoice No. 278955 dated February 22, 2018, $62.91 for Invoice No. 693997 dated March 23, 2018, and $182.12 for Invoice No. 997504 dated April 13, 2018. Mr. Galvaz denied receiving or benefitting from any of the materials identified on Complainant’s remaining invoices, and further denied knowledge of the unauthorized purchases that had occurred on Respondent’s account. 14. Mr. Galvaz testified that Respondent’s address of record on file with Complainant is incorrect, as he moved the business approximately one and a half years ago and did not update his address with the United States Postal Services until months later. Mr. Galvaz never updated Respondent’s mailing address with Complainant. 15. Mr. Galvaz admitted that he knew payment on his account was due thirty days after a charge was made, and further admitted that he did not make timely payments for his purchases because he lacked the funds at the time they were due. After the underlying complaint was filed, Mr. Galvaz attempted to pay what he thought he owed to Complainant, but was not able to do so because Complainant would not delete the remaining eighteen invoices Mr. Galvaz disagreed with from Respondent’s account. 16. Overall, Respondent argued that Complainant erred in permitting unauthorized persons to make charges to his account, and that Respondent should not be held liable for Complainant’s error. Complainant argued that it reasonably and detrimentally relied on subcontractor misrepresentations and should be compensated for its loss. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before the Office of Administrative Hearings pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq. 2. The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.[10] 3. The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.[11] 4. Complainant bears the burden of proof to establish cause to discipline Respondent’s license by a preponderance of the evidence.[12] Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[13] 5. “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] 6. Ariz. Rev. Stat. § 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.” 7. Ariz. Rev. Stat. § 32-1156.01 states, in pertinent part, that after a hearing an Administrative Law Judge may provide restitution to any person who is injured by an action of a licensee. 8. Ariz. Rev. Stat. § 32-1154(E) holds, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. It also holds that no future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.” 9. Here, the material facts are not in dispute. 10. The credible evidence of record reflects that of the twenty-one invoices Complainant alleged Respondent owed, only three were valid as each transaction had been performed by an authorized user on Respondent’s account, totaling $1,650.18. These are charges Respondent knew were due to be paid to Complainant within thirty-days of each transaction, but failed to timely pay. 11. Respondent is not liable for any remaining charge at issue on his account, as the charges were made by unauthorized users who Complainant failed to prevent from accessing Respondent’s account. 12. Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to pay Complainant on invoices 278955, 693997, and 997504. This is an affirmative defense that Respondent bears the burden to establish. This burden has not been sustained. The record shows that Respondent failed to promptly and completely pay Complainant for three invoices, and had no affirmative defense(s) for doing so. 13. Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant has also established cause for the Registrar to discipline Respondent’s contractor’s license. RECOMMENDED ORDER Based on the foregoing findings of fact and conclusions of law, IT IS RECOMMENDED that that on the effective date of the Final Order in this matter Respondent, A Team Air Conditioning and Heating Inc. ROC License No. 209745, shall be suspended for three (3) days. IT IS FURTHER RECOMMENDED that that five days after the effective date of the Registrar’s Final Order in this matter, Respondent provide proof of a $1,650.18 payment, in certified funds to Complainant, to the Registrar pursuant Ariz. Rev. Stat. § 32-1156.01.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the ordered restitution five days after the effective date of the Registrar’s Final Order in this matter, a civil penalty of $500.00 shall be assessed against Respondent. IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty days following the effective date of the Registrar’s Final Order, the Registrar revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty. 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 40 days from the date of that certification. Done this day, October 04, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See https://roc.az.gov/contractor-search?Id=a0Yt000000ACZG5EAP. [2] Id. [3] Id. [4] Id. [5] Id. [6] See Hearing File, pages 15-42. [7] See Hearing File, page 28. [8] See Notice of Hearing. [9] Id. [10] See Ariz. Rev. Stat. § 32-1156.01; Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz. 437, 441, 803 P.2d 430, 434 (App. 1990). [11] See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995). [12] Ariz. Rev. Stat. § 41-1092.07(G)(2); Ariz. Admin. Code R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [13] See Ariz. Admin. Code 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).

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