ALJDEC decisions subject to certification as final

2019A-04899-NPC-ROC · Registrar of Contractors · 2020-01-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Palomino Construction LLC,

COMPLAINANT,

v.

K R B Development LLC,

License No. ROC 206697,

RESPONDENT.

No. 2019A-04899-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: December 19, 2019, at 1:00 p.m.

APPEARANCES: Palomino Construction LLC (“Complainant”) appeared through Michael Angelo Palomino, its qualifying party/officer; K R B Development LLC (“Respondent”) was represented by James N. Hanson, Esq., Lang & Klain, PC.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On or about April 27, 2005, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC 206697 for General Dual KB-1 Dual Building Contracting to Respondent. Rex Burton Bailey is Respondent’s qualifying party/ member and the only person listed on the license. Respondent’s address is 23532 N. 70th Ave., Peoria, Arizona 85383-1669.

On or about April 19, 2016, the Registrar issued License No. ROC 304629 for General Dual KB-1 Dual Building Contracting to Complainant. Michael Angelo Palomino is the qualifying party/officer on the license.

On or about September 26, 2019, Complainant filed a complaint with the Registrar alleging that “Complete Facility Group/K R B Development” owed Complainant a total of $80,000.00 for work that Complainant had performed.

On October 17, 2019, the Registrar issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) against Respondent.

On or about October 23, 2019, Respondent’s attorney, James N. Hanson of Lang & Klain, PC filed an answer to the Citation, denying any violation of A.R.S. § 32-1154(A)(10) and requesting that the complaint be dismissed because Respondent did not have a contract with Complainant and Complainant had named the wrong contractor in the complaint. The Registrar subsequently denied the motion to dismiss.

On or about November 1, 2019, attorney Jeffrey J. Tonner filed another written answer to the Citation, again denying any violation of A.R.S. § 32-1154(A)(10), but affirmatively alleging that “Complete operates under the contractor’s license with KRB Development LLC. Palomino named KRB in error in its complaint. The proper contractor’s license for the OMNI project was CentiMark.”

On or about November 5, 2019, Mr. Hansen sent a letter to Mr. Tonner, informing him that Respondent had not hired Mr. Tonner’s firm. Peter Graziano had told Mr. Bailey that Mr. Graziano’s lawyer would send a letter to the Registrar, but that Mr. Graziano never was authorized by Respondent to enter contracts for legal representation or construction services on Respondent’s behalf.

The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

A hearing was held on December 19, 2019

Complainant submitted fifteen exhibits and presented the testimony of two witnesses: (1) Susan Wulff, who is not an attorney, but specializes in turning around financially troubled companies and whom Complainant hired to help it pursue its claim against Respondent; and (2) Mr. Palomino. Respondent submitted nine exhibits and presented Mr. Bailey’s testimony.

Additional Hearing Evidence

Mr. Bailey explained that Peter Graziano was married to one of Mr. Bailey’s wife’s friends from high school. In approximately 2017, Mr. Graziano stated that he could get maintenance contracts for Respondent. In June 2018, Respondent registered the DBA Complete Facility Solutions Group with the Arizona Secretary of State, providing Respondent’s address on N. 70th Avenue in Peoria. Mr. Bailey testified that Mr. Graziano did not ever bring any maintenance business to Respondent.

In June 2018, Mr. Graziano registered Delta Solutions Group, LLC (“Delta”) with the Arizona Secretary of State. Mr. Graziano is the managing member and Delta’s address is 23650 N. 35th Drive, Glendale, Arizona 85310. Delta also appropriated the DBA Complete Facility Solutions Group. Delta does not have a contractor’s license.

On or about November 29, 2018, Delta solicited bids from subcontractors for work on the Omni Tucson National Golf Resort in Tucson (“the Omni project”). Complainant subsequently issued a proposal to Delta, which Mr. Graziano accepted on Delta’s behalf. Complainant performed the work and submitted invoices to Complete Facility Solutions Group, Inc., Mr. Graziano’s Nevada corporation. Mr. Palomino communicated with Mr. Graziano and Mike Sozio, Sr., Complete Facility Solution Group’s project manager, about the Omni Project. Mr. Palomino never communicated with Mr. Bailey.

Centimark Corporation is the general contractor on the Omni project. Centimark Corporation has paid Delta in full for its subcontractors’ work on the project.

On September 5, 2019, after Complainant filed the complaint against Respondent, Mr. Graziano wrote a check to Complainant for $30,709.06 on Delta’s account for the Omni project. The bank dishonored the check for insufficient funds.

Mr. Bailey testified that Respondent does not have any subcontract for the Omni project and has not done any work or received any payment for the project. Before Complainant’s complaint, he had never heard of Delta. Mr. Bailey noted that Delta’s and Complainant’s proposals do mention Respondent. The address shown for Delta and for the appropriated name, Complete Facility Solutions Group, are different from Respondent’s address.

Mr. Bailey testified that, although Respondent worked for Centimark Corporation some years ago on a tenant improvement project, Respondent did not work on the Omni project. He removed the DBA Complete Facility Solutions Group from Respondent’s license after he received the complaint, which caught him by surprise. Mr. Bailey testified that he spoke to Mr. Graziano, who stated he was trying to resolve the payment issues. Mr. Bailey stated that he had nothing to do with Mr. Graziano. Mr. Bailey never used the DBA.

CONCLUSIONS OF LAW

A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation of a contractor’s license, the following:

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.

(Emphasis added.) This matter lies within the Registrar’s jurisdiction.

For a principal to be liable to third parties for a putative agent’s unauthorized acts, the principal must do something to cause the third party to reasonably believe that the principal has authorized the agent to act on the principal’s behalf.

In this case, Complainant has presented ample evidence that Mr. Graziano and Delta appropriated Respondent’s former DBA, Complete Facility Solutions Group, but has not presented one iota of evidence that Mr. Bailey or anyone associated with Respondent knew about the appropriation or did anything to make Mr. Palomino or Complainant believe that, if Mr. Graziano and Delta failed to pay Complainant for the Omni project, they could reasonably expect to receive payment from Respondent. Therefore, the complaint is this matter must be dismissed.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the final order in this matter, Complainant Palomino Construction LLC’s complaint in Case No. 2019-04899 against Respondent K R B Development LLC’s License No. 206697 shall be dismissed.

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, 2020.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors