ALJDEC - Licensing
2023A-03138-NPC-ROC · Registrar of Contractors · 2023-07-31
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Tri State Cabinet Solutions LLC,
COMPLAINANT
v.
Brookfield Residential Construction LLC
License No. ROC 215964,
RESPONDENT
No. 2023A-03138-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: July 10, 2023, 9:00 A.M.
APPEARANCES: Clifford Copeland, Owner, appeared on behalf of Complainant; Craig Neubaur, Vice President-Construction, appeared on behalf of Respondent
ADMINISTRATIVE LAW JUDGE: Roger A. Geddes
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
1. Brookfield Residential Construction, LLC (Respondent), is the holder of License Number 215964 issued by the Registrar of Contractors (Registrar).
2. On or about March 13, 2023, Tri State Cabinet Solutions, LLC (Complainant), filed a Complaint against Respondent with the Registrar alleging that Respondent owed Complainant an unspecified sum for the supply and installation of cabinets into homes built by Respondent.
3. On April 11, 2023, the Registrar then issued a Citation for Alleged Violation of A.R.S. § 32-1154(A)(10) for the alleged failure by Respondent to pay monies in excess of $750.00 when due for materials or services rendered in connection with Respondent’s operations as a contractor. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.
4. The Registrar issued a Notice of Hearing that set a hearing after a continuance for July 10, 2023, at 9:00 A.M. At the hearing, Clifford Copeland testified on behalf of Complainant; Craig Neubaur testified on behalf of Respondent. The Tribunal received and admitted Complainant’s unnumbered exhibits submitted on July 5, 2023, and Respondent’s unnumbered exhibits submitted on July 7, 2023. On July 10, 2023, the day of and apparently after the hearing, Complainant also submitted a purported June 22, 2022, letter addressed to Respondent. As this evidence was not available at the hearing, the Tribunal did not admit it into evidence or consider it.
5 Clifford Copeland testified on behalf of Complainant, as herein relevant to the Citation, that Respondent owes him for unpaid manufacturer’s surcharge amounts as reflected in Invoice Nos. 4045, 4046, 4060, 4063, 4064, 4065, 4066, 4067 4068, 4074, 4086, and 4089 (surcharge invoices) for cabinets installed by Complainant. A compilation of those invoices is reflected in Invoice No. 4097 showing an amount owed of $5,597.00 (not including late charges). He further testified that Respondent owes him for unpaid labor amounts as reflected in Invoice Nos. 4075, 4076, 4077, 4078, 4079, 4080, 4081, 4082, 4092, 4093, 4094, 4095, and 4096 (labor invoices) for cabinets not installed by Complainant. A compilation of these invoices is reflected in Invoice No. 4098 showing an amount owed of $3,250.00 (not including late charges).
Mr. Copeland further presented evidence that Respondent had initially been informed of a 3.15% fuel charge from the cabinet manufacturer that started on September 1, 2021. Thereafter, he stated that on October 1. 2021, Complainant notified Respondent that the manufacturer had imposed a 17% surcharge that was to be effective after January 7, 2022, due to increasing materials and transportation costs incurred by the manufacturer. He further testified that on May 10, 2022, Complainant notified Respondent that after July 1, 2022, the surcharge of 17% was being increased by the cabinet manufacturer to 24.5% and that future invoices to Respondent would reflect the additional 7.5% surcharge.
Mr. Copeland stated he met with Respondent on June 20, 2022, to discuss the 24.5% surcharge and that Complainant agreed to absorb some of the surcharge but that no agreement on the split was reached at the meeting. He indicated he later agreed to split the 7.5% increase and that he would absorb 4.5% of that 7.5%, and that he would cap Respondent’s share of the 24.5% surcharge at 20%, which he stated was to begin July 1, 2022. He indicated that Respondent had been paying the full amount of the discharge until that time, but that Respondent first objected when the manufacturer raised the surcharge to 24.5%. Complainant contended Respondent only paid half of the 20% surcharge it was supposed to pay for the cabinets installed at the 12 residences and still owes the other half. Thereafter, he said Respondent informed him it had found a new cabinet installer in December 2022, and that Respondent then cancelled the contract despite Complainant having done preliminary work to prepare bids for the cabinets for 13 residences that Complainant would have installed but for Respondent’s cancellation.
Complainant also contends that labor charges are due on the cabinets for these 13 cancelled residences because it had been required to do field measurements and meet with Respondent’s superintendent to prepare cabinet bids for those residences. Mr. Copeland testified he estimated a flat rate of $250 per residence based on a labor rate of $75.00 per hour for each of the 13 residences for which Respondent allegedly cancelled the cabinets.
6. Craig Neubaur testified on behalf of Respondent, as herein relevant, that he paid Complainant in full according to the written contract and that there is no change order reflecting this increased price being passed on to Respondent in the way of surcharges. He said he became aware of the manufacturer’s 17% surcharge in June 2022 at the time of the proposed increase to 24.5% and from his staff learned that Complainant was passing on to him most if not all of the surcharge. He stated he thereafter called the June 20, 2022 meeting, and while they agreed at the meeting to split the surcharge, no agreement was reached on how surcharge was to be split. He stated that it was his understanding that it was to be split 50-50 between Complainant and Respondent.
He further testified that he never cancelled the cabinets for the 13 residences, but that he would have never agreed to absorb the majority of the 24.5% manufacturer’s surcharge because the residences had already been pre-sold and the cost could not have been passed on to the home buyer. He stated he later found a new cabinet installer to install the cabinets which he pointed out did not have manufacturer’s surcharges imposed.
Lastly, Mr. Neubaur stated that regardless of how the manufacturer’s surcharge was to have been split between the parties, he further disputed the calculation of the surcharge. He testified that he never got backup to support the surcharge amounts and still could not reconcile the amounts from the invoices Complainant provided to him. He stated the surcharge was supposedly based on the material cost, but that Complainant never provided him with documentation of the material costs from which to verify the surcharge.
7. Respondent did not contend that it lacked the capacity to pay any amount due or that it had not received sufficient monies as payment for the particular construction work project or operation for which Complainant provided materials or services.
CONCLUSIONS OF LAW
1. The Registrar has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154.
2. 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 these matters is by preponderance of the evidence. See Arizona Administrative Code Rule 2-19-119.
3. To warrant such sanctions by the Registrar, a Complainant must demonstrate by a preponderance of the evidence that Respondent violated the statutory section cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re: Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also Culpepper v. State of Arizona, 187 Ariz. 431, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” BLACK’S LAW DICTIONARY 1182 (Rev. 6th ed. 1990).
4. A.R.S. § 32-1154(A)(10) included 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 $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.
5. A.R.S. § 32-1154(A)(10). Complainant has not satisfied its burden to demonstrate that Respondent has failed to pay Complainant the amount claimed due of $8,847.00 ($5,597.00 for surcharge invoices and $3,250.00 for labor invoices) or any other amount that had become due for materials or services rendered in connection with Respondent’s operations as a contractor. Complainant has failed to present sufficient evidence to support the amounts included in the surcharge invoices. Complainant has further failed to present sufficient evidence of the amounts included in the labor invoices, and has failed to show that any of these labor amounts constitute amounts due for services rendered.
6. Surcharge invoices - Complainant contends $5,597.00 is due from Respondent represented by 12 invoices for the supply and installation of cabinets for 12 residences for which Respondent paid only half of the line item delineated as surcharges. There is no dispute that Respondent paid all other amounts due on these invoices. However, Complainant has failed to provide sufficient evidence of the surcharge amounts or that Respondent had an obligation to pay them.
Complainant’s invoices are insufficient to show the calculation of the surcharges. As a threshold matter, the invoices presented, each labelled as “Final Invoice,” show a line item for total surcharge, and then an amount due representing 50% of that surcharge. As Complainant testified that Respondent had paid 50% of the 20% surcharge and that the invoices show the other 50% was due from Respondent, the Tribunal can only assume there are earlier invoices and these “final” invoices presented by Complainant that show payments already made by Respondent are more in the nature of statements reflecting amounts due rather than initial invoices. Complainant did not make clear whether these invoices presented were the only invoices provide to Respondent with respect a particular residence. Whether the earlier invoices existed or not, Complainant did not present them into evidence or explain the calculations on the final invoices. It is noted that Respondent did submit evidence of bids from Complainant for each residence, but there are no references to surcharges in those bids despite being dated after the inception of the 24.5% surcharge.
With regard to the surcharge line item on each invoice, there is no explanation as to its calculation. The surcharge notification letters from the cabinet supplier, Aristokraft, sent to Complainant dated October 21, 2021 (increasing surcharge to 17.5%), and dated May 4, 2022 (increasing surcharge to 24.5%) both state “The order surcharge will continue to appear on the acknowledgement and invoice as a line item.” It appears that the 17% or 24.5% surcharge was calculated on a material cost charged by Aristocrat, but Complainant did not present these Aristocrat acknowledgements or invoices which presumably would have verified the calculation of the surcharge. Instead, Complainant merely presented its own invoices with an unsubstantiated surcharge line item which was insufficient for Respondent or this Tribunal to verify.
The surcharge amounts sought by Complainant were not contemplated under the contract. Rather, Complainant seeks a sum based on an alleged verbal agreement between the parties or the implied conduct of the parties. Unfortunately, the parties did not memorialize this verbal agreement or understanding with a signed change order at or near that time and the parties have differing understandings as to what that agreement was.
Were this Tribunal inclined to find that at least some amount was due for material or services rendered, there was not sufficient evidence presented for the Tribunal to calculate an amount or to verify the disputed amount claimed by Complainant. Complainant has therefore failed to meets its burden with respect to the disputed surcharge amounts.
7. Labor invoices - Complainant contends $3,250.00 is due from Respondent represented by 13 invoices each in the amount of $250.00 for labor allegedly expended in connection with Complainant’s preliminary work for cabinet installation for 13 residences that were cancelled allegedly by Respondent. However, Complainant has failed to provide sufficient evidence of the services rendered or that compensation for such services is an amount due for materials or services rendered under A.R.S. § 32-1154(A)(10).
First, the 13 invoices reflecting $250.00 per invoice are insufficient to substantiate the alleged preliminary cabinet work performed by Complainant and the amount of $3,250.00. Mr. Copeland testified the amount he contends is due in this regard was merely an estimate of the work expended, particularly the hours, relating to the 13 residences. Complainant presented no time sheets or other documentary evidence to show how much work was actually performed. Further, it is significant to note that Complainant’s proof in this regard with respect to the alleged labor hours expended was inconsistent. Mr. Copeland testified that the flat fee of $250.00 for each cancelled residence was based on a labor charge of $75.00 per hour, which calculates to 3.33 hours per residence. However, each of the invoices he presented instead reflect the $250.00 flat fee based on 2 hours labor at $125.00 per hour. Complainant made no effort to reconcile his testimony with the actual invoices.
Lastly, there was no evidence presented to show that Respondent benefitted from Complainant’s preliminary work for the cancelled cabinets for the 13 residences. Thus, the evidence was insufficient to show that Complainant provided the labor services in connection with the cancelled cabinets.
Further, even had Complainant presented sufficient evidence of its time expended, what Complainant is essentially seeking in this regard is legal damages for Respondent’s alleged wrongful cancellation or breach of the contract. This is so because there is nothing in the contract between the parties to suggest Complainant’s entitlement to any monetary sum for cabinets not supplied. The contract does not include a breakdown for time and materials provided nor is the preliminary work to prepare a bid delineated anywhere in the invoices for the cabinets actually supplied. Indeed, Complainant testified this amount instead was subsumed in the overall contract price to Respondent, and therefore the amount Complainant seeks is not provided for under the contract. Thus, while Complainant may very well have suffered damages if in fact Respondent wrongfully canceled or breached the contract, creating an invoice listing these alleged damages does not create an amount due for material or services rendered. Further, even had Complainant proven it suffered damages in this regard, an award of legal damages is not within the province of this Tribunal.
6. In this matter, Complainant has not established that Respondent’s license should be disciplined for a violation of A.R.S. § 32-1154(A)(10).
RECOMMENDED ORDER
Based on the foregoing, it is recommended that on the effective date of the final order in this matter, that the Citation and Complaint shall be dismissed.
Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.
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 forty (40) days from the date of that certification.
Done this day, July 31, 2023.
/s/ Roger Geddes
Administrative Law Judge
Transmitted electronically to:
Martín Quezada
Director
Registrar of Contractors
c/o Legal Department
1700 W. Washington Street, Suite 105
Phoenix, AZ 85007
[email redacted]
Tri State Cabinet Solutions LLC
[email redacted]
Brookfield Residential Construction LLC
3030 N 3rd Street #965
Phoenix, AZ 85012
[email redacted]
By: OAH Staff