ALJDEC decisions subject to certification as final

2021A-06281-NPC-ROC · Registrar of Contractors · 2022-03-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

JCR Property Services, LLC,

COMPLAINANT

Kaiser Construction, LLC

License No. ROC 216899,

RESPONDENT

No. 2021A-06281-NPC-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: February 22, 2022

APPEARANCES: John Rosser and Chris Knight appeared on behalf of Complainant JCR Property Services, LLC. Ronald Meyer, Esq. represented Respondent Kaiser Construction, LLC. Jason Kaiser, Gary Faucett, and Cindy Sasso appeared as witnesses for Respondent Kaiser Construction, LLC.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

Kaiser Construction, LLC (“Respondent”) is the holder of License No. 216899, issued by the Arizona Registrar of Contractors (“Registrar”).

On or about December 3, 2021, JCR Property Services, LLC (“Complainant”) filed a Complaint against Respondent with the Registrar alleging that Respondent had failed to pay Complainant the sum of $45,254.00 for construction work performed on the Hassayampa Veterinary Clinic in Wickenburg, Arizona.

On December 13, 2021, the Registrar issued a Citation charging Respondent with the alleged violation of A.R.S. § 32-1154(A)(10). Respondent timely filed an Answer to the Complaint.

A Notice of Hearing was issued on January 7, 2022, advising the parties that a hearing would convene before the Office of Administrative Hearings on February 22, 2022. On the date and time set for hearing, John Rosser, qualifying party and owner of Complainant, and Chris Knight, Director of Operations, appeared on behalf of Complainant. Ronald Meyer, Esq. represented Respondent. Jason Kaiser, owner and member, Gary Faucett, project manager, and Cindy Sasso, office manager, testified on behalf of Respondent. Complainant’s Exhibits A and C through Q were admitted into evidence. Respondent’s Exhibits 1 through 13 were admitted into evidence.

At the outset of the hearing, Mr. Knight testified that Respondent continues to owe Complainant $36,900.07 for work performed by Complainant on the project pursuant to the parties’ contract and revisions thereto.

On or about November 4, 2020, Respondent contracted with Complainant for Complainant to perform the demolition, framing, insulation, drywall and exterior and interior painting for the project. The contract price was $166,230.00. Respondent has paid Complainant $83,010.00 for work performed pursuant to the contract and subsequent change orders.

Chris Knight, Director of Operations for Complainant, testified that the project was delayed from the start, and that Complainant could not begin its scope of work until the end of November 2020. Mr. Knight explained that after demolition, and during the framing stage of the project, Complainant was having difficulty manning the project due to COVID-19, and three of Complainant’s framers had been involved in an automobile collision and were recovering from their injuries.

On or about May 10, 2021, Complainant notified Respondent of the staffing issues and the concern about causing further delay on the project. Consequently, the parties agreed to hire Optimum Construction, LLC (“Optimum”) to provide additional manpower for the job. On May 17, 2021, Respondent’s project manager, Gary Faucett, emailed Complainant “a courtesy punch list.” Mr. Knight testified that it is standard procedure at the end of a project to perform punch list items, that those items do not represent defective work, but rather are items that need to be completed. Mr. Knight testified that Complainant timely performed those items in order to be removed from the project.

The parties agreed that Respondent would pay Optimum $45.00 per man hour on the job which equated to a $19,260.00 contract deduction for the work Optimum was performing for the dates May 17, 2021 through June 4, 2021. On June 1, 2021, the parties agreed to an additional $17,166.00 contract deduction for interior painting, and modified the contract to delete interior painting from Complainant’s scope of work. On June 16, 2021, the parties also agreed to a $32,000.00 contract deduction for taping, and modified the contract to delete taping from Complainant’s scope of work.

Mr. Knight testified that upon completion of its modified scope of work, Complainant requested final payment from Respondent. Respondent did not respond to Complainant’s requests for payment, and consequently, Complainant filed the instant Complaint. In response to the filed Complaint, Respondent informed Complainant that Respondent was deducting an additional $37,181.00 from the remaining contract price, plus an additional $5,600.00 “administrative cost,” and therefore Respondent owed Complainant a total of $203.03.

Mr. Knight testified that Respondent has attempted to deduct the cost of metal work for a carport. However, such was not within the scope of Complainant’s contract with Respondent and Mr. Knight testified that a carport was not on the building plans, therefore, such deduction is not warranted.

Mr. Knight further testified regarding the Unconditional Waiver and Releases (“Waiver”) submitted by Respondent. Mr. Knight testified that Respondent would not release any payments without a signed Waiver as Respondent had experienced difficulty in the past with obtaining signed Waivers after releasing payments. Therefore, Complainant signed the Waivers in good faith believing it would be paid the monies due and owing from Respondent.

Jason Kaiser, owner and member of Respondent, testified regarding the progression of the project in regard to Complainant’s involvement. Mr. Kaiser confirmed Mr. Knight’s testimony regarding the fact that the demolition work performed by Complainant was completed, and that Complainant requested assistance with framing due to a lack of manpower. Mr. Kaiser testified that he spoke with Mr. Knight and agreed to obtain quotes in order to relieve Complainant from certain scopes of work, including taping and painting. Mr. Kaiser testified that the parties agreed to hire Optimum at $45.00 per hour to assist Complainant with completing the framing, and for $32,000.00 to perform the taping. Mr. Kaiser acknowledged that he does not have knowledge regarding what work Optimum performed on the job beyond the framing and sheetrock, however testified that Complainant had an employee on the job the entire time Optimum was performing framing work, in order to verify the hours charged by Optimum. Mr. Kaiser testified that Respondent paid Optimum $37,181.00 to complete the framing. Mr. Kaiser asserted that Complainant was in breach of contract due to the time it took on the project due to its inability to staff the job. However, at hearing, Respondent did not present any evidence of a schedule for the project.

Gary Faucett, project manager for Respondent, testified that Complainant was having issues staffing the job and that workmanship was an issue. However, there was no evidence presented establishing that Respondent filed a workmanship complaint against Complainant with the Registrar. Mr. Faucett testified regarding his daily notes and photos, as well as the punch list. Mr. Faucett asserted that while a punch list is common at the end of a job, in this case, it was created to “catch the framers up.” However, Mr. Faucett testified that it took one week for the work delineated on the punch list to be completed and that all of those items were completed by Complainant by June 1, 2021.

Cindy Sasso, Respondent’s office manager, testified about her reconciliation notes contained on Complainant’s July 20, 2021 accounting. Ms. Sasso testified that Respondent did not accept Complainant’s accounting because as of July 20, 2021, Optimum was still performing work on the job and Respondent “did not know the final figure.” Ms. Sasso further testified regarding other amounts that Respondent deducted from Complainant’s final payment, including for door corrections, exterior metal damage, skim work, and “administrative and supervision costs.” Respondent’s invoice for “administrative and supervision costs” simply contains one line item for such costs in the amount of $5,600.00. The invoice lacks specificity as to what those costs encompass, and Mr. Kaiser’s testimony explained that Respondent “roughly came up with $5,600.00 unilaterally” because Respondent was “trying to gain money back to make Respondent whole.”

Respondent submitted Waivers from Optimum, some of which have no corresponding documentation establishing what those payments cover.

Ms. Sasso also testified that Respondent has not been paid in full for the project. Ms. Sasso testified that Respondent has been paid over a million dollars, and is owed $149,495.94.

Respondent argued that “at most this is a legitimate dispute about what is owed” and therefore, discipline is not warranted.”

CONCLUSIONS OF LAW

The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in this matter is by 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.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license:

Failure by a licensee or agent or official of a licensee to pay monies in excess of $750 when due for materials or services rendered in connection with the licensee's operations as a contractor unless the licensee proves that the licensee lacks the capacity to pay and has not received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

The evidence established that due to circumstances outside of Complainant’s control, Complainant was unable to provide sufficient staffing for the project. Complainant timely and diligently informed Respondent of the situation and both parties agreed to modify their contract terms, including eliminating certain scopes of work, specifically, interior painting and taping for a total contract deduction of $49,166.00, and a deduction of $19,260,00 for the assistance with the completion of the framing. Respondent agreed to modify the contract terms and to use the deductions from its contract with Complainant to pay other contractors to perform those scopes of work. Mr. Faucett acknowledged that Complainant performed all of the punch list items within one week, there was no evidence presented establishing that Respondent filed a workmanship complaint against Complainant with the Registrar, and the only evidence of workmanship issues was Respondent’s self-serving testimony. Further, Respondent’s unilateral decision to charge Complainant additional monies for administrative and supervision fees is arbitrary, especially in light of Mr. Kaiser’s testimony regarding such. Further, those charges appear to not be based on anything in particular, as evidenced by the invoice which is not itemized, and there was no testimony provided detailing the hours and hourly rate for those administrative and supervision costs. Therefore, the Administrative Law Judge concludes that those costs cannot justifiably be attributed to Complainant. The Administrative Law Judge further concludes, based upon the credible, probative, and substantial evidence of record that all of the deductions Respondent has assessed against Complainant are not justified, and that Respondent owes Complainant in excess of $750.00 for work Complainant performed.

The undersigned Administrative Law Judge does not find Respondent’s arguments persuasive. Based upon the evidence presented at hearing, the defenses available under A.R.S. § 32-1154(A)(10) have not been established. Respondent did not present evidence establishing that it “lacks the capacity to pay and has not received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.”

Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant at least $750.00 for services or materials rendered in connection with Respondent’s contracting business.

Based upon Respondent’s violation of the provisions of A.R.S. § 32-1154(A)(10), grounds exist to impose discipline against Respondent’s license.

RECOMMENDed order

Based on the foregoing, it is recommended that on the effective date of the Final Order, the Registrar suspend Respondent’s License No. 216899 for a period of five (5) days.

In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of the certification.

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-137160-45720000Done this day, March 4, 2022.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000