ALJDEC decisions subject to certification as final

2021A-05353-NPC-ROC · Registrar of Contractors · 2022-03-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Morningstar Homes LLC,

COMPLAINANT,

v.

MGD Building Service LLC

dba MGD Builders

License No. ROC 295207,

RESPONDENT.

No. 2021A-05353-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 10, 2022 at 9:00 AM.

APPEARANCES: Michael Scott Longanecker appeared on behalf of Morningstar Homes LLC (“Complainant”). Matthew Ducharme appeared on behalf of MGD Builders (“Respondent”).

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

On January 13, 2015, the Registrar issued ROC License No. 295207 for General Dual KB-2 Residential and Small Commercial contracting to Respondent. Matthew Gabriel DuCharme is listed on the license as the Qualifying Party/Member. Leslie Ann DuCharme is also listed on the license as Member. The address of record for the license is 4433 N. 62nd Ave. Phoenix, Arizona 85033.

Pursuant to Arizona Administrative Code (“Ariz. Admin. Code”) R4-9-117, Administrative Notice is taken of Respondent’s license files as shown on the Registrar’s public website. Regarding ROC License No. 295207, such prior license record reflects that Respondent’s license is active and renewed through January 31, 2023. The license has not been previously disciplined and no prior complaints have been resolved or otherwise settled on the license. However, the record reflects that there are two open complaints against the license; one of which is presumed to be related to this matter. Respondent has an active $1,400.00 surety bond for the license issued through RLI Insurance Company, effective October 28, 2014.

On or about October 11, 2021, the Registrar received a complaint from Complainant alleging nonpayment of services against Respondent. Specifically, Complainant alleged that Respondent had failed to remit timely payments on 1 invoice and owed Complainant an outstanding balance of $4,785.00 as a result. Complaint No. 2021-05353 was assigned to Gail Mathews by the Registrar for investigation.

On or about October 21, 2021, the Registrar received a copy of a Bid Proposal for $7,680.00 that was only signed by Complainant, and a letter of explanation from Complainant.

On October 27, 2021, the Registrar issued a Notice of No Pay Complaint 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 November 03, 2021.

On November 01, 2021, Respondent provided a response to the Registrar. Respondent alleged, in pertinent part, that the reason Complainant was not fully compensated for its work was because Complainant “failed to submit certain charges for its work so they could be submitted to the client for billing.”

The parties did not have further communication after Respondent’s response was received by the Registrar.

On November 16, 2021, the Registrar issued a Citation to Respondent for an alleged violation of Ariz. Rev. Stat § 32-1154(A)(10). Respondent was notified that a failure to provide an Answer by December 01, 2021, 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.

On November 19, 2021, the Registrar received Respondent’s timely Answer. In its Answer Respondent admitted that Complainant had been hired for a commercial project in Phoenix, Arizona, and alleged that in the middle of the project its Superintendent abruptly resigned. Per Respondent, it made multiple attempts to obtain accounting documents from Complainant prior to submittal to the project’s owner (“Owner”) but never received the documentation it requested from Complainant. Therefore, Complainant’s payment was reduced to an amount Respondent could verify based on its records. The final amount tendered to Complainant was for “payment in full” to close out the project.

On December 01, 2021, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 26, 2022. Per the Notice of Hearing, the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charge(s) alleged in the Citation:

Charge 1: A violation of A.R.S. § 32-1154(A)(10).

Hearing Evidence

Complainant called Michael Scott Longanecker – Owner to testify and submitted Exhibits 1 into the record. Respondent called Matthew Ducharme – Owner to testify and submitted Exhibits 1-8 into the record. The Registrar’s agency file was also admitted into the record as its own exhibit. The substantive facts of record are as follows:

On or about December 15, 2020, Complainant submitted a $7,680.00 bid to “supply hardware and install approximately 28 sheets of plywood backing at 10 awning locations” to Respondent for commercial subcontracting work located at 8222 S. 48th St. Phoenix, Arizona 85044.

Although Respondent did not sign the bid, between December 20, 2020, and December 28, 2020, Complainant commenced work on the project. Complainant completed its assignment sometime in April 2021.

During the project, Respondent’s onsite manager, Superintendent Marvin Aceves (“Superintendent”) informed Mr. DuCharme that additional awnings needed to be removed in order to proceed with his desired plywood reinforcing project, because the responsible party had failed to do so. Complainant was authorized to complete the removal and continue with the original scope of work. Complainant was also instructed to perform additional demolition, prep, and construction outside the scope of its original agreement. No written Change Orders were executed for aforementioned amendments.

During mid to late-March 2021, after Superintendent left Respondent’s employ, Respondent requested documentation regarding the parties Change Order agreements. In response, Complainant provided Respondent with documents to establish the approval of $10,300.00 worth of work and/or materials.

On May 17, 2021, Complainant issued Invoice No. 2240 to Respondent for $7,680.00 for the original contract agreement, plus an additional $15,085.00 for the additional work performed and materials provided, for a total of $22,765.00.

On June 25, 2021, Respondent informed Complainant that it had no means to recover the additional $4,785.00 Complainant sought from Owner.

On August 20, 2021, Respondent tendered Complainant a check for $17,980.00 for Invoice No. 2240. Attached to the payment was a line item veto for Complainant’s additional $15,085.00. Typed underneath was a payment amount of $10,300.00 with a note that states, “The above crossed out items where not approved and part of our agreement. By cashing check No. 10189 in the amount of $17,980.00 you are agreeing with the corrections and amount owed, and no additional funds are owed.” (All errors in original.) Also attached was an Unconditional Waiver and Release on Final Payment.

Complainant did not sign the waiver or deposit Respondent’s check.

Financials for the project were closed out by Owner in July 2021.

On September 21, 2021, Complainant sent written notice of the disputed funds at issue to Owner. In response, Respondent sent the following correspondence to Owner, in pertinent parts:

I am able to document the trail of when I began asking for updated financial info on this project when [Superintendent] quit. I chased [Complainant]for a couple of weeks so that I could gather all of the proper information to include in my change order ... When the invoice came in May, I followed up with emails, calls, texts all attempting to figure out where the difference came from and how to address it. I figured at that point we would split the difference or work it out somehow. I spoke with Scott on the phone a number of times seeking resolution that never came. When he expressed that he had not received my emails, I took screen shots of the entire email message and texted them to him ... For lack of answers, we paid the amount that was owed according to the agreements that were made on the project.

On October 06, 2021, Respondent notified Complainant that accused Complainant of committing “an unfortunate oversight” in failing to provide Respondent with requested documentation in March 2021, and that as a result no further payment(s) could be remitted for the project.

Shortly thereafter communication between the parties broke down, and Complainant filed its complaint with the Registrar.

Respondent declined to provide a closing argument.

In closing, Complainant argued that because Respondent did not argue that the underlying work had not been completed, or performed satisfactorily, that evidence of completion as billed had been established; notwithstanding the fact that Complainant was unable to provide any documentation to support it had been approved to perform work and/or provide materials for the additional $4,785.00 invoiced to Respondent.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and has been properly brought before OAH for adjudication.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

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.

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.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Statutes should be interpreted to provide a fair and sensible result. Statutes shall be liberally construed to affect their objects and to promote justice.

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.”

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.

The material facts of record establish that the parties had a subcontracting agreement for $7,680.00, and that Superintendent, acting on behalf of Respondent, authorized an additional 15,085.00 in labor and materials. It is undisputed that Respondent tendered Complainant $10,300.00 on Invoice No. 2240, and that an outstanding balance owed is $4,785.00.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to issue payment to Complainant on the underlying projects. This is an affirmative defense that Respondent bears the burden to establish. Respondent’s argument, that Complainant failed to timely and/or correctly invoice Respondent for its preauthorized work and related materials, is insufficient. The onus to properly execute a Change Order in this matter was on Respondent. The record is devoid of any evidence that would tend to suggest Complainant failed to perform additional work and/or provide materials invoiced to Respondent. Because the credible evidence of record shows that Respondent failed to promptly and completely pay Complainant for labor and/or materials on this project, and had no affirmative defense(s) for doing so, Respondent has failed to sustain its burden of proof.

Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant also established cause for the Registrar to discipline Respondent’s contractor’s license.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent MGD Builders, ROC License No. 295207, shall be suspended until Respondent provides the Registrar with proof that 22,765.00 in certified funds has been tendered to Complainant for Invoice No 2240 as restitution in this matter.

IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint 2021-05353 may be closed.

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 is forty days after the date of that certification.

Done this day, March 02, 2022.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors