ALJDEC - Licensing
2023A-12133-NPC-ROC · Registrar of Contractors · 2024-12-18
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
R & C Development LLC,
COMPLAINANT,
v.
Western Pine Development Inc.
ROC License No. 065104,
RESPONDENT.
No. 2023A-12133-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: March 15, 2024, August 26, 2024, and October 25, 2024.
APPEARANCES: Ryan D. Bailey, Esq. appeared on behalf of R & C Development LLC (“Complainant”) with Ruben Garcia as a witness. Ryan Sandstrom, Esq. appeared on behalf of Western Pine Development Inc. (“Respondent”) with David Morris as a witness. Crystal Garcia and Dane Porter observed.
ADMINISTRATIVE LAW JUDGE: Jenna Clark.
EXHIBITS ADMITTED INTO EVIDENCE: The Amended Notice of Hearing (“Amended Notice”), including the Arizona Registrar of Contractor’s (“Registrar”) attached agency file, Complainant Exhibits 1-17 and 19-20, Respondent Exhibits 1-78, and Minute Entry – Granting Continuances dated January 17, 2024, February 22, 2024, March 19, June 03, 2024, August 28, 2024, were admitted into the evidentiary record.
_____________________________________________________________________
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 Registrar.
FINDINGS OF FACT
Background and Procedure
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. On May 12, 1986, the Registrar issued ROC License No. 065104 for General Residential B contracting to Respondent. Respondent’s license is active, in good standing, and renewed through April 30, 2026. Marlin Dane Porter is listed as the Chief Executive Officer, Director, and President on the license. Barbara Anne Porter is listed as an Officer and Shareholder on the license. The address of record for the license is P.O. Box 30096 Mesa, Arizona 85275-0096. Respondent has a $9,000.00 surety bond for the license issued through Merchants Bonding Company, effective May 12, 1986. The license has been disciplined on one (1) prior occasion, and has had three (3) other complaints resolved or otherwise settled against it. Currently, the record reflects that there is one (1) open complaint against the license, which is presumed to be related to this matter.
In or around October 2023, the Registrar received a complaint from Complainant alleging nonpayment of services and/or materials against Respondent. Specifically, Complainant alleged that Respondent had failed to remit timely payment(s) on thirteen (13) invoices totaling $47,859.00 for work on five (5) different residential subcontracted projects commissioned by Respondent. The Registrar designated it Complaint No. 2023-12133 and assigned the case to Tedi Quezada in their legal department for investigation.
On October 31, 2023, 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 07, 2023.
On November 07, 2023, Respondent replied, in pertinent part, to the complaint as follows:
This complaint filed by [Complainant] is completely false and very much an incomplete version of the situation currently filed by [Complainant]. We will be filing our own complaint and response against [Complainant] for job abandonment, unfinished work that they were paid for upfront for, fraudulent use of an hvac [sic] license, working as an unlicensed contractor and theft of materials and services.
On November 21, 2023, 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 06, 2023, 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 28, 2023, the Registrar received Respondent’s timely Answer whereby Counsel for Respondent offered that Complainant bid on multiple projects for Respondent involving plumbing, electrical, and HVAC services, and subsequently entered into contractual agreements with Respondent for the projects. At that time, Complainant avowed to Respondent that it was engaged in construction under ROC License No. 309612, issued to Gideon Mechanical Air Conditioning & Heating LLC (“Gideon”), with permission from the licensee. However, when Respondent contacted Gideon to confirm, it was advised that the license holder had no knowledge of Respondents projects and denied granting Complainant permission to operate under its license. Per Respondent, after it sought action after Complainant, Complainant submitted Complaint No. 2023-12133 to the Registrar to try and obtain payment for its incomplete and substandard work that it was not licensed to perform.
On November 29, 2023, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 19, 2024. Per the December 07, 2023, Amended Notice 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 Ruben Garcia as a witness. Respondent called David Morris as a witness. The substantive facts of record are as follows:
Respondent is a general contractor that operated out of the greater Phoenix, Arizona area. Complainant is a subcontractor and holder of ROC License No. 296418 for general dual residential and small commercial contracting. On an unknown date, the parties entered into a verbal agreement for Complainant to perform work on five (5) residential projects in Northern Arizona.
Complainant issued the following invoices totaling $151,429.00 to Respondent:
Invoice No. 23598 issued February 13, 2023, for $1,750.00 regarding kitchen and bathroom remodeling work performed at 3189 Rainbow Ln. Pinetop-Lakeside, Arizona 85935 (“Rainbow Project”).
Invoice No. 24691 issued April 20, 2023, for $2,000.00 regarding HVAC installation performed at 3299 Bluegill Dr. Pinetop, Arizona 85935 (“Bluegill Project”).
Invoice No. 27598 issued April 20, 2024, for $12,025.00 regarding drywall, cabinetry, painting, and flooring at 4061 W. Red Twig Ln. Show Low, Arizona 85901 (“Red Twig Project”).
Invoice No. 29599 issued May 04, 2023, for $970.00 regarding deck work performed at 2254 E. Ridge Rd. Pinetop-Lakeside, Arizona 85935 (“Ridge Project”).
Invoice No. 35719-C issued May 13, 2023, for $4,710.00 regarding electrical, trim, and plumbing work performed at 3728 Woodpecker Ln. Pinetop-Lakeside, Arizona 85935 (“Woodpecker Project”).
Invoice No. 25719-C issued May 13, 2023, for $6,846.00 regarding countertop fabrication and installation performed at the Woodpecker Project.
Invoice No. 29599 issued May 24, 2023, for $5,000.00 regarding drywall, siding, and deck work performed at the Bluegill Project.
Invoice No. 24598 issued June 13, 2023, for $5,795.00 regarding deck work performed at the Red Twig Project.
Invoice No. 35598 issued June 30, 2023, for $3,010.00 regarding cabinetry for the Red Twig Project.
Invoice No. 87435 issued July 10, 2023, for $1,985.00 regarding door and casings installation performed at the Bluegill Project.
Invoice No. 79691 issued July 10, 2023, for $3,243.00 regarding T&G installation performed at the Bluegill Project.
When Respondent subcontracted the Bluegill Project to Complainant, the agreement between the parties was for the T&G to be included in Complainant’s framing costs.
Invoice No. 36784 issued August 12, 2023, for a $1,825.00 Change Order regarding lighting installation at the Red Twig Project.
Invoice No. 35598 issued August 23, 2023, for $2,425.00 regarding countertop fabrication and installation performed at the Red Twig Project.
Invoice No. 35778 issued August 27, 2023, for a $2,275.00 Change Order regarding fireplace work performed at the Red Twig Project.
On August 27, 2023, Crystal Garcia reissued invoices to Respondent for all 5 projects, noting in pertinent parts as follows:
Invoices with deposits needing [sic] to be paid before work can continue.
[Red Twig Project] #35598 needs to be paid in full before work begins. It was not part of the original estimate as there was other work that needed to be completed first. If you are not willing to pay upfront for this, we will gladly hand the work for this over to you and take this out of our files.
[Bluegill Project] #24691 deposits of $7,090.00 needs [sic] to be collected before the air conditioning machines can be delivered. The final balance of $2,000.00 needs to be paid as soon as the machines are installed.
The outstanding invoices for completed work come to $29,804.00. The pending invoices (not including any additional work done on the [Red Twig Project]) come to $11,515.00. The total that is currently due is $41,319.00. If we add the rest of the work for the [Red Twig Project], it comes to $46,936.00.
Respondent paid Complainant $105,570.00 toward the aforementioned projects. Per the invoices, there is an outstanding balance due of $45,859.00.
Additional Evidence
All scopes of work involving plumbing, electrical, and HVAC were restricted by Complainant’s license and required those scopes of work to be subcontracted.
Mr. Garcia admitted to performing work on Respondent’s projects under Gideon’s ROC License No. 309612. Gideon was onsite for the Woodpecker Project “some of the time.” The homeowner for the project would not tender payment to Respondent for Complainant’s work because neither party could provide proof that Complainant was appropriately licensed to perform the work it had on the project. Complainant quit the project immediately thereafter.
Respondent subsequently received multiple requests from the homeowner to repair Complainant’s work. Respondent paid for another subcontractor to make repairs prior to being terminated by the homeowner.
Respondent was never paid for the project.
Mr. Garcia testified that he has a partnership with someone who has an HVAC license issued by the Registrar, but could not provide that person’s name or ROC License No.
Mr. Morris testified that as of the final day of hearing, Respondent was still on the Red Twig project as all scopes of work had not been completed. Thus, Respondent had yet to be paid by the homeowner.
Mr. Morris testified that Complainant did not complete all scopes of work for the Bluegill Project. Specifically, Mr. Garcia did not complete drywall or paint, and did not install HVAC.
In the latter part of August 2023, Mr. Garcia texted Respondent to advise that he was in the hospital and accompanied a photograph. The following day, Respondent was informed that Mr. Garcia was observed on a different jobsite. Respondent’s attempts to reach Mr. Garcia by telephone were unsuccessful, but Mr. Morris was able to reach him via text message. In them messages Mr. Morris inquired about Mr. Garcia’s whereabouts and advised him of multiple concerns Respondent had with Complainant’s workmanship on several projects. Mr. Morris and Mr. Porter continued to text message Mr. Garcia through mid-October 2023, regarding workmanship issues, with little to no response.
Closing Arguments
Complainant did not submit a closing argument.
In closing, Respondent argued that Mr. Garcia was untrustworthy and dishonest, and sought payment from Respondent for poor and/or incomplete work. Respondent alleged that Mr. Garcia ceased communications with Respondent after it abandoned several projects, and then accused Respondent of failing to pay outstanding invoices. Per Respondent, it had to tender payments to other subcontractors to repair and/or complete Mr. Garcia’s work, in an aggregate amount more than it allegedly owed Complainant, resulting in a balanced owed to Respondent for the projects at issue, not Complainant. Ultimately, Respondent denied owing Complainant any monies and opined that discipline was not warranted against ROC License No. 065104 as a result of Complaint No. 2023-12133.
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. § 32-1129 et seq., provides numerous benefits and protections for subcontractors including their right to timely payment, 1.5% interest per month on unpaid invoices, and the right to stop work for nonpayment (after notice).
Ariz. Rev. Stat. § 32-1129.02(A) provides, in pertinent part, that “[p]erformance by a subcontractor in accordance with the provisions of a construction contract entitles the subcontractor to payment from the party with whom the subcontractor contracts.”
Ariz. Rev. Stat. § 32-1129.02(B) provides, in pertinent part, that “[i]f a subcontractor has performed in accordance with the provisions of a construction contract, the contractor shall pay to its subcontractors within seven days of receipt by the contractor of each progress payment, retention release or final payment, the full amount received for such subcontractor’s work and materials supplied based on work completed or materials supplied under the subcontract.”
Ariz. Rev. Stat. § 32-1129.02(E) provides, in pertinent part, that “[i]f a contractor chooses to withhold the application or certification for all or a portion of a subcontractor’s billing, the contractor must prepare and issue a written statement within fourteen days to the applicable subcontractors stating the reasons for withholding the application or certification from the owner.”
Ariz. Rev. Stat. § 32-1129.02(F) provides, in pertinent part, that “[i]f the owner issues a written statement stating that the owner declines to certify or approve all or a portion of the contractor’s billing and if the amounts to be paid from that billing by the contractor to any subcontractors are affected by the owner’s decision not to certify or approve, the contractor shall send a copy of that written statement within seven days after the receipt to any affected subcontractors or material suppliers.”
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.
In the case at bar, the Tribunal is tasked with determining how much money Complainant is owed by Respondent, if at all, but if so whether said debt(s) constitute a violation of Ariz. Rev. Stat. § 32-1154(A)(10) for which Respondent’s license may be disciplined by the Registrar.
Upon review of the record, the relevant and credible evidence establish that after Respondent subcontracted work on a project to Complainant and was satisfied with Complainant’s workmanship, Respondent accepted bids from Complainant for additional projects. None of the terms were specifically identified beyond general scopes of work and location for each project, as neither party rendered any of their agreements into writing. Thus, the parties’ contract(s) have objectively ambiguous and vague terms. The record also establishes that Respondent tendered down payments on some projects, per Complainant’s request, as well as progress payments. However, the record further reflects that after a number of homeowners complained to Respondent regarding Complainant’s workmanship, Complainant all but ceased communication with Respondent and refused to perform corrections and/or complete the projects. Per Ms. Garcia’s correspondence to Respondent August 27, 2023, Complainant refused to move forward on the Red Twig or Bluegill Projects without additional payments. Complainant was not permitted to stop work for nonpayment because Respondent ever agreed to the modified terms outlined by Ms. Garcia prior to issuance of her August 27, 2023, advisement.
Here, Complainant argued that it was owed $47,859.00 on the five (5) projects at issue, but did not provide evidence that it (a) completed all scopes of work for the projects, (b) that the work performed met the Registrar’s minimum workmanship standards, and/or (c) that each homeowner paid Respondent in full on the projects.
On the other hand, Respondent established that (a) it had to hire other subcontractors to repair and/or complete Complainant’s work on several projects; work performed unlawfully under Gideon’s ROC License No. 309612, (b) at least one (1) homeowner refused to remit payment to Respondent for its project, and (c) that Respondent had not completed at least one (1) other project and thusly had not received payment. Respondent did not, however, establish how much funds were expended repairing or otherwise completing Complainant’s work, to whom the funds were paid, or when.
Additionally, the multitude of text messages exchanged between the parties also establishes that Complainant knew, or should have known, that Respondent was dissatisfied with a portion of its workmanship, yet neither party took steps to have said workmanship inspected by the Registrar to ensure that it met the regulatory agency’s minimum workmanship standards.
While the Tribunal is not in agreement with Respondent that it is “owed money” by Complainant as a result of the projects at issue, as no evidence was presented to substantiate the claim, it is clear that Complainant’s work on multiple projects had to be repaired and/or completed by another contractor. Respondent cannot be compelled to pay Complainant in full for incomplete or otherwise poor work.
Because Complainant failed to establish Respondent’s alleged violation(s) of Ariz. Rev. Stat. § 32-1154(A)(10) by a preponderance of the evidence, Complainant has also failed to establish cause for the Registrar to discipline ROC License No. 065104.
Considering the facts and circumstances of this matter, Complaint No. 2023-12133 must be denied.
RECOMMENDED ORDER
Based on the foregoing,
IT IS RECOMMENDED that Complaint No. 2023-12133 be dismissed by the Registrar.
NOTICE
Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising OAH 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 OAH.
In the event of certification of the Administrative Law Judge Decision by OAH’s Director, the effective date of the Order is forty days after the date of that certification.
Done this day, December 18, 2024.
Office of Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted by either mail, e-mail, or facsimile to:
Tom Cole, Director
c/o Legal Department
Registrar of Contractors
1700 W. Washington St., Ste. 105
Phoenix, AZ 85007
[email redacted]
Ryan Sandstrom, Esq.
Taylor Barlow, Esq.
Copper Canyon Law, LLC, Counsel for Respondent
43 E. 1st Ave.
Mesa, AZ 85210
[email redacted]
[email redacted]
Ryan D. Bailey, Esq.
Stone Canyon Law, PLLC, Counsel for Complainant
502 S. College Ave., Ste. 205
Tempe, AZ 85281
[email redacted]
By: OAH Staff