ALJDEC - Licensing
2023A-04499-NPC-ROC · Registrar of Contractors · 2023-08-15
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Gaston Contracting LLC,
COMPLAINANT
v.
Sterling CM LLC
License No. ROC 325522,
RESPONDENT
No. 2023A-04499-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: Brian McCoy, Project Management/Estimator, and George Gaston, Vice President, appeared on behalf of Complainant; Garrett Blackwell, Owner, appeared on behalf of Respondent
APPEARANCES: July 26, 2023, 1:00 P.M.
ADMINISTRATIVE LAW JUDGE: Roger Geddes
_____________________________________________________________________
FINDINGS OF FACT
Background and Procedure
1. Sterling CM, LLC (Respondent), is the holder of License Number 325522 issued by the Registrar of Contractors (Registrar).
2. On or about April 17, 2023, Gaston Contracting, LLC (Complainant), filed a Complaint against Respondent with the Registrar alleging that Respondent owed Complainant the sum of $69,503.79 for millwork for a tenant office improvement work by Respondent, general contractor, for a building owner (Owner).
3. On May 15, 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 26, 2023, at 1:00 P.M. At the hearing, Complainant presented the testimony of Brian McCoy, Project Management/Estimator; Respondent presented the testimony of Garrett Blackwell, Owner, and Michael Croft, Chief Operating Officer. Neither party submitted exhibits to the Tribunal.
5 Brian McCoy testified on behalf of Complainant, as herein relevant to the Citation, that Invoice No. 4 in the amount of $38,849.54 represents a progress payment due, Invoice No. 5 in the amount of $1,687.05 represents a change order amount due, and $28,967.20 is due as a retention payment. He stated the amount sought by Complainant should not be reduced by liquidated damages for delay, because he contends the delays were caused by the untimely receipt of drawings and specs and the delay in the Owner taking possession. He acknowledged the emails Respondent sent to him outlining liquidated damages first in the amount of $500.00 per day then $1,000.00 per day, that he confirmed with a return email.
He testified he did not pay some materialmen due to the fact that Respondent had withheld payment. He further testified that he recognized that he owed one of his materialmen vendors who had a lien against the property in the amount of $40,768.00 due to nonpayment, but asserted that he would have paid off the lien amount once Respondent paid its outstanding balance owed. He further recognized the contract provides that Complainant is paid only when Respondent gets paid from the Owner.
6. Garrett Blackwell testified on behalf of Respondent, as herein relevant, that he worked closely with Complainant to mitigate Complainant’s delay on the project. He stated the Owner got involved and wanted a completion date for move-in so he met with Complainant on November 14, 2022, and asked for a date they would complete their work. He further stated that Complainant agreed that if Complainant did not complete its work by December 2nd, Complainant would be charged $500.00 a day until completion. He testified that Mr. McCoy wrote up an agreement as to this daily charge, but inserted a December 5th completion date instead. He stated that on December 27th when Complainant still had not completed its work, he indicated the charge would now be $1,000.00 per day until Complainant completed its work including the punch list, which he stated Complainant confirmed with a return email. He said the Owner did not receive a Certificate of Occupancy until January 27, 2023, and that Complainant did not complete its last punch list item until January 31st.
He further testified the contract requires Respondent to pay its subcontractors as it gets paid by the Owner. He further stated one subcontractor, Chivino Services, filed a lien in the amount of $40,768.00 in April 2023, which he paid to release the lien. He further disputed Invoice No. 5 which was a change order in the amount of $1,687.05.
7. Michael Croft, testified on behalf of Respondent, as herein relevant, that the Sterling-CM, LLC Subcontract Agreement (contract) between the parties was signed on May 10, 2022, and on June 1st Respondent paid Complainant a deposit of 40 per cent of the contract price for materials. He stated that on August 23rd, Complainant stated it could not complete its work by the substantial complete date in the contract, but that it could complete its work by October 14th. He further stated Complainant did not complete its work by that date which led to the November 14th meeting at which time Complainant was told that all its delay had caused the Owner to be concerned. He said Complainant gave a December 2nd date as its new completion date, and agreed to a $500.00 per day charge if it did not complete its work by that date. He stated that when the work was still not complete by December 27th, the daily delay charge would be $1,000.00 until completed.
He described the contract as a “paid when get paid” contract, meaning Complainant did not get paid until Respondent got paid by the Owner. He stated the Owner had withheld final payment from Respondent due to delay, and that Respondent had entered into a settlement agreement with the Owner to compensate it for delay, but that he still expected a final retention payment from the Owner. He stated Respondent had received 76 per cent of its contract price from the Owner and had paid Complainant 76 per cent of its contract price and that therefore Complainant is not entitled to its final retention payment yet, if at all.
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 $69,503.79, or any other amount, that had become due for materials or services rendered in connection with Respondent’s operations as a contractor.
As a threshold matter, Complainant conceded that Respondent paid one of Complainant’s materialmen directly to release a lien which Complainant contended it would have paid out of Respondent’s final payment to Complainant. The contract provides in paragraph 10 in part that “Payments otherwise due may be withheld by Contractor on account of ... failure of Subcontractor to make payments properly to its subcontractors.... Contractor may rectify the same at Subcontractor’s expense....” Further, paragraph 11 states that “If Subcontractor fails to remove any lien by bonding it or otherwise, the Contractor may retain sufficient funds out of any money due or thereafter to become due by Contractor to the Subcontractor, to pay the same and all costs incurred by reason thereof and pay said lien or liens and costs out of any funds at any time in the hands of Contractor owing to Subcontractor.”
Complainant did not dispute this payment amount of $40,768.00 made by Respondent to one of Complainant’s materialmen; therefore, netting that amount from the amount claimed by Complainant as permitted under the contract (essentially covering Invoice No. 4 in the amount of $38,849.54 and Invoice No. 5 in the amount of $1,687.05) results in the alleged amount now claimed of $28,735.79, which is an amount slightly less than the final retention amount claimed by Complainant in the amount of $28,967.20
6. With regard to what is now in essence Complainant’s claim for its final retention payment, the Tribunal finds that this payment even if owed is not yet contractually due. It was not clear whether Complainant was aware or not that Respondent had not yet received its final retention payment from the Owner. Complainant did not dispute that Respondent had not received it and acknowledged its retention payment would not be due until Respondent had received its final retention payment from the Owner. Indeed, paragraph 3 of the contract states in part:
All payments due to Subcontractor shall be made by Sterling-CM solely out of funds actually received by Sterling-CM from the Owner. Subcontractor acknowledges that he is sharing, to the extent of payment to be made to Subcontractor, in the risk that Owner may fail to make one or more payments to Sterling-CM for all or portion of the work and that payment from the Owner is a condition precedent to payment to Subcontractor. The full amount payment of Subcontractor is to be solely a pro-rata portion of the total amount received by Sterling-CM from the Owner on Sterling-CM Pay Requests which include Subcontractors’ work. The pro-rata portion shall be computed by dividing the approved amount Subcontractor has billed Sterling-CM by the amount Sterling-CM has billed the Owner, and applying the same ratio to the amount of payment actually received by Sterling-CM.” (underline in the original).
Respondent contended that it had been paid only 76 per cent of its contract price with the Owner and had paid 76 per cent of its contract price with Complainant. As Complainant did not dispute this or provide contrary evidence, the contract dictates that the final payment, if any, from Respondent to Complainant was not yet due.
7. In that the Tribunal has found no amount yet due from Respondent to Complainant, the Tribunal need not address the issue of Respondent’s claim for liquidated damages as an offset to any amount that may later be claimed by Complainant as due. The Tribunal recognizes that if and when Respondent receives its final retention payment from the Owner, this dispute may resurface again.
8. 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, August 15, 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]
Sterling CM LLC
1660 N Rosemont Ste 103
Mesa, AZ 85205
[email redacted]
Gaston Contracting LLC
2663 N 36th Ave
Phoenix, AZ 85009
[email redacted]
By: OAH Staff