ALJDEC decisions subject to certification as final
2022A-07206-NPC-ROC · Registrar of Contractors · 2022-11-15
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
McDermott Construction LLC,
COMPLAINANT,
v.
Spata Building LLC
ROC License No. 326583,
RESPONDENT.
No. 2022A-07206-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: November 08, 2022 at 9:00 AM.
APPEARANCES: Larry Cholley appeared on behalf of McDermott Construction LLC (“Complainant”) with Ryan McDermott as a witness. Franco Calabrese appeared on behalf of Spata Building LLC (“Respondent”). Eris Harris and Antonio Spata observed.
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 October 21, 2019, the Registrar issued ROC License No. 326583 for General Dual KB-2 Residential and Small Commercial contracting to Respondent. Antonio Spata is listed on the license as the Qualifying Party/Member. Desert Sand Homes LLC is listed on the license as the Parent Entity. The address of record for the license is 7800 E, Lincoln Dr., Ste. 2021. Scottsdale, Arizona 85250.
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. 326583, 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 is one (1) open complaints against the license, which is presumed to be related to this matter. Respondent has an active $14,000.00 surety bond for the license issued through Western National Mutual Insurance Company, effective October 18, 2019.
On August 23, 2022, the Registrar received a complaint from Complainant alleging nonpayment of services and materials against Respondent. Specifically, Complainant alleged that Respondent had failed to remit timely payments on seven (7) invoices based on work performed in and out of scope of an existing contract between the parties, and that Respondent owed Complainant an outstanding balance of $16,900.00 as a result. The matter was designated Complaint No. 2022-07206 by the Registrar and assigned to Doug Ulmer for investigation.
On or about August 26, 2022, 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 September 02, 2022.
Respondent did not provide a response to the Registrar.
On September 07, 2022, 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 September 22, 2022, 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 September 19, 2022, the Registrar received Respondent’s timely Answer and attachments. In short, Respondent alleged in its Answer that the invoices at issue had not been paid because (a) Complainant failed to perform all of the work it was supposed to per contract, (b) some of the work Complainant performed was poor and required correction, (c) at least three (3) items had been removed from Complainant’s scope of work and warranted credit(s) due Respondent in an undisclosed amount that was allegedly greater than the totality of Complainant’s invoices. Respondent admitted that “[O]n August 16th 2022, we decided to forego our complaints / request for credits,” however, because Complainant failed to accept Respondent’s August 17, 2022, offer to pay $16,900.00 in exchange for Complainant completing unidentified work Respondent deemed outstanding, Respondent decided to “[revert] back to our original case of complaints” and “[request] credits as stated in the August 11, 2022 email correspondence in which these credits should exceed the amount of [Complainant’s] claim to for $16,900.” (All errors in original.)
On September 19, 2022, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on November 08, 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
Larry Cholley and Ryan McDermott testified on behalf of Complainant. Respondent declined to present witness testimony. The Registrar’s agency file, including the Notice of Hearing and supplemental agency file, was also admitted into the record as its own exhibit. The substantive facts of record are as follows:
On or about September 28, 2020, Complainant entered into a subcontracting agreement with Respondent whereby Complainant agreed to provide work on a residential 11-building duplex/triplex project in Chandler, Arizona for $1,051,833.00. Specifically, Complainant agreed to perform rough carpentry, wood framing, equipment, and material for the project.
The project commenced on or about October 22, 2020. Complainant completed work in January 2022.
Billing was scheduled for the 25th of each month, to be paid within 30 days.
Complainant issued the following invoices to Respondent for its work on the project:
Invoice 10000-936 issued July 12, 2022, for $2,544.00 for extra labor and material outside the scope of the contract to finish another contractor’s work on building #6.
Invoice 10000-898 issued July 05, 2022, for $3,401.00 for labor and siding material on building #6 per original contract.
Invoice 10000-561 issued May 16, 2022, for $1,880.00 for extra labor and material outside the scope of the contract to finish another contractor’s work on building #6.
Invoice 10000-325 issued April 22, 2022, for $1,475.00 for extra labor and material outside the scope of the contract to finish another contractor’s work on building #6.
Invoice 10000-311 issued April 15, 2022, for $1,350.00 for extra labor and material outside the scope of the contract to finish another contractor’s work on building #6.
Invoice 10000-33 issued March 25, 2022, for $4,750.00 for extra labor and material outside the scope of the contract to finish another contractor’s work on buildings #6 and #9.
Invoice 7264 issued February 09, 2022, for $1,500.00 for extra labor on building #10.
Nearly all work required of Complainant per contract was completed, save siding.
On an unknown date, Complainant issued two (2) credits for metal framing to Respondent which reduced the outstanding balance owed from $21,659.00 to $16,900.00.
Each invoice for additional labor and/or material outside the scope of the parties’ original contract agreement was authorized in advance by Franco Calabrese on behalf of Respondent.
At an unknown point during the project, Respondent switched banks. Upon inquiry regarding the outstanding invoices at issue, Mr. Calabrese offered that Respondent was awaiting a loan approval from its new bank.
Because Respondent abruptly ceased payment on Complainant’s invoices, Complainant was forced to pay its vendors out of pocket.
Both parties declined to provide closing arguments.
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 that Respondent had been making progress payments on until February of 2022. The record also establishes that Mr. Calabrese authorized additional work outside the scope of the original contract, and that Complainant performed substantially, if not completely, on said work. The record further establishes that, at a minimum, Complainant did not complete siding work that it agreed to perform under the terms of the original contract between the parties. It is also undisputed that Respondent failed to tender payment on any of the invoices at issue in this matter.
Thus, the question remains whether Respondent raised a sufficient justification or excuse for failing to issue payment to Complainant on any of the underlying invoices. This is an affirmative defense that Respondent bears the burden to establish. The Tribunal is not at liberty to make presumptions in favor of Respondent or accept facts in mitigation on behalf of Respondent that are not supported by the evidence. Although Respondent’s decision not to present evidence is not a factor in aggravation, Respondent’s admissions in its Answer is. Respondent admitted that it planned to pay Complainant $16,900.00 for the invoices at issue, but changed its mind a day later because Complainant would not agree to the terms of payment. Respondent’s admission evinces its acknowledgement that Complainant is indeed owed $16,900.00 for the underlying invoices. The argument regarding outstanding credits possibly owed Respondent is a red herring, as Respondent already waived that issue. Because the credible evidence of record reflects that Respondent owes Complainant payment(s) for the invoices at issue in this matter, and had Respondent had no affirmative defense(s) for failing to timely remit payment(s), Respondent has failed to sustain its burden of proof.
Therefore, as Complainant has 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,
IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Spata Building LLC, ROC License No. 326583, shall be suspended until Respondent provides the Registrar with proof that $13,499.00 in certified funds has been tendered to Complainant for completed work on Invoice Nos. 7264, 10000-936, 10000-561, 10000-325, 10000-311, and 10000-33 as restitution in this matter.
IT IS FURTHER RECOMMENDED that Respondent shall not tender payment to Complainant, in whole or part, for Invoice No. 10000-898 as Complainant admitted that its scope of work had not been completed.
IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint 2022-07206 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, November 15, 2022.
Office Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted electronically to:
Jeffrey Fleetham, Director
c/o Legal Department
Registrar of Contractors
1700 W. Washington St., Ste. 105
Phoenix, AZ 85007
[email redacted]
Spata Building LLC, Respondent
7800 E Lincoln Dr. #2021
Scottsdale, AZ 85250
[email redacted]
McDermott Construction LLC, Complainant
1734 W Williams Dr., Ste. 5
Phoenix, AZ 85027
[email redacted]
By Miranda Alvarez
Legal Secretary