ALJDEC - Licensing
2023A-13073-NPC-ROC · Registrar of Contractors · 2024-04-08
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Atomic Construction LLC,
COMPLAINANT
v.
Robby Geneal Chima
DBA: Magna Construction
License No. ROC 337352,
RESPONDENT.
No. 2023A-13073-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: March 12 and March 21, 2024.
APPEARANCES: Kristin Rooney, Esq. and LLC member, appeared on behalf of Complainant. Robby Chima, sole proprietor, appeared on his own behalf.
ADMINISTRATIVE LAW JUDGE: Greg Hanchett
EXHIBITS ADMITTED INTO EVIDENCE: The entirety of the administrative record attached to the notice of hearing in this matter, Complainant’s exhibits 1 through 9, and Respondent’s Exhibits 1 through 6 were admitted into evidence. Complainant’s Exhibit 10 was excluded.
In this matter, Complainant alleges that Respondent failed to pay monies owed to Complainant in excess of $750.00 in violation of A.R.S. § 32-1154(A)(10) stemming from a contract between the parties for floor installation. Respondent does not contend that it lacked the capacity to pay nor does it contend that it had not received sufficient monies to pay. While there is substantial dispute about whether Complainant is owed the amount of money sought in the complaint ($22,424.75), there is no dispute that Respondent failed to pay $3,987.25 by Respondent’s own calculations when due on the flooring installation contract. Also, Respondent’s deduction of $5,000.00 from the amounts due Complainant for a liquidated damages clause that Respondent had with the homeowner but which was not part of the contract between Complainant and Respondent should not have been withheld. These two amounts, totaling $8,987.25, exceed the $750.00 jurisdictional amount contained in A.R.S. § 32-1154(A)(10). Therefore, based on the following findings of fact and conclusions of law, the undersigned finds that Complainant has proven by a preponderance of the evidence that Respondent violated A.R.S. § 32-1154(A)(10).
FINDINGS OF FACT
1. At all times material to this matter, Respondent was a licensed contractor in Arizona holding ROC License No. 337352 issued by the Arizona Registrar of Contractors (Registrar). Complainant at all times material to this case was also a licensed contractor in Arizona that engages in flooring and tile installation.
2. Complainant and Respondent entered into a contract for Complainant to complete flooring on a residential remodeling located on Charter Oak in Scottsdale, Arizona (Charter Oak). Respondent was acting as the general contractor on the remodel. Among other provisions in the contract, Respondent agreed that “any and all change orders will be discussed and signed and paid by Magna upon acceptance without delay.” Noticeably absent from the agreement was any mention of any obligation on Complainant’s part to pay liquidated damages to Respondent nor was there any reference to a liquidated damages agreement that apparently existed between Respondent and the homeowner.
3. The contract called for Complainant to install shower and bathroom tile, kitchen backsplash tile and flooring tile at the Charter Oak residence. The specifics of the flooring installation involved Complainant providing 2,510 square feet of tile (which amount included additional tiles to cover waste during the installation project) and installing the tile in the home. The agreement also called for Complainant to install a specific grout known as Laticrete Spectralock 1.
4. The total amount Respondent was to pay to Complainant for the work was $60,374.26. Complainant and Respondent also agreed in the contract that Respondent would pay 1/3 of the total amount due upon acceptance of the agreement, 1/3 during the project and the final amount would be paid upon completion of the work. Respondent paid the first installment amount of $20,124.75 contained in Invoice #3986 and paid the second installment amount of $20,124.75 contained in Invoice #3988.
5. During the installation project, the parties made two written change orders to the agreement. The first, Change Order No.003576-1 dated May 3, 2023 related to additional floor preparation and re-grouting of the shower due to the homeowner’s decision to change grout color. Respondent agreed to pay an additional $2300.00 to Complainant for that change order. The second related to the parties agreeing that Complainant would credit Respondent for costs incurred in cleaning haze off the tile floor which Complainant had installed. This change order resulted in a credit of $2,587.50 against the amount Respondent owed to Complainant.
6. At or close in time to the Charter Oak flooring install that generated this complaint, Complainant and Respondent entered into a contract for Complainant to complete a flooring installation for Respondent’s remodel project at a house which the parties referred to at hearing as the Garfield project. The Garfield project generated a homeowner complaint against Respondent with the Registrar which in turn generated a complaint from Respondent against Complainant for workmanship at the Garfield project. All complaints related to the Garfield project were eventually dismissed without litigation.
7. Unbeknownst to either party, the Laticrete Spectralock 1 which Complainant had purchased from a local supplier, Bedrosian’s (the supplier), had expired prior to its installation. Because the product had expired prior to installation, the integrity of the grout was impacted. This in turn necessitated the removal and replacement of the grout with new Laticrete Spectralock 1.
8. The supplier agreed to credit Complainant for the cost of replacing the bad grout with new Laticrete Spectralock 1. The removal and replacement of the Laticrete Spectralock 1 generated a protracted dispute between the parties about the need and extent of cleaning to clear a haze that formed on the tile after the installation of the new grout. Complainant
9. On May 30th, 2023, Respondent sent an email to Complainant's jobsite foreman, Luke, asking that Complainant discuss with the supplier “the timeliness issue [the supplier] caused and reimbursing the $5,000 that the client is charging for extending the deadline.” The clear import of this email was that Respondent perceived at this point that it was not Complainant’s fault but rather the supplier's fault in supplying the expired grout that caused the untimely completion of the remodeling project which precipitated the homeowner’s liquidated damages charge against Respondent.
10. The parties continued to argue over whether the cleaning of the tile had been properly carried out and completed. On July 17, 2023, Rooney, Atomic Co-owner Adam Galor, and Chima had a telephone conversation regarding the proper approach to the cleaning of the grout haze left on the tile in an effort to get the job considered completed so Complainant could get paid. The two emails that emanated from that conversation, the first an opening salvo from Chima and the second Complainants’ response, showed no mutually agreeable resolution to the haze cleaning issue or who should be responsible for it. Chima’s email to Complainant regarding his understanding of the conversation stated;
We spoke on Monday and I forwarded the email from Ladicrete [sic] explaining the product and the process to remove the grout haze from the tile at Scott's house. I also emailed the quote of $2,587.50 from the floor cleaning company. We cannot take responsibility for cleaning the grout as per our conversation on Monday. I set the tile cleaners to come out Thursday, July 20th 2023. We need your approved [sic] in writing before any work can be done. The contract with the floor cleaning company should be between the floor cleaners and atomic.
Complainant’s responsive email stated:
Robbie:
Thank you for your email. However, it does not accurately reflect the conversation we had on Monday.
The perceived “haze” can be cleaned in more than one way and to ask us to pay an additional $2600 to have a floor cleaned a fourth time is a bit much. We said if you felt the need to hire them and reduce what is owed to Atomic, we could agree. But, as we said, we do not have any confidence that your client will ever be satisfied and therefore if you choose to do this, then we will wash our hands of any perceived imperfections of the cleaning. This simply cannot continue. The client has wholly unreasonable expectations as everyone is well aware. We have also lost confidence that we can expect timely payment from Magna.
11. On August 17, 2023, Complainant provided a final invoice in the amount of $19,837.25 for the unpaid balance on the contract. This included a credit to Respondent of $2,587.50 for the additional floor cleaning change order (Paragraph 5, above). In response, Respondent’s employee Lisa Chima responded with an email indicating that Respondent was taking deductions in the amount of $16,165.00 from the final invoice amount, leaving a balance due Complainant of $3,987.25. Respondent’s email stated:
Upgraded grout install
This client paid for upgraded grout and paid extra for the labor to install it correctly. There were two issues, the grout was expired, which was [the supplier’s] fault, and your workers did not install the grout correctly per instructions, which created the hazing issue, which is Atomic’s fault. The client will not be paying the $2500 for the extra labor to install the upgraded grout for the reasons outlined above.
Haze cleaning
Robby asked both Adam and Luke what they wanted to do with regards to the hazing. They said that they didn’t have the labor to get it cleaned so that left us no other choice, but to make sure the cleaned and haze free according to industry standard. The cleaning and recleaning [sic] of the haze was not completed until Wednesday, August 16th and is still waiting for client review/final walk. The total cost incurred to clean and remove the haze will be deducted from your final invoice (See the breakdown below for cost incurred to date). The client is doing a final walkthrough on Monday to approve the haze removal.
Tile Cracks and Chips
There’s one cracked tile that happened when your workers were removing the grout. (See attached pic) There are many chipped tiles, of which, the homeowners are only asking for the extremely damaged ones to be replaced; he said he’ll just live with the other ones. We feel this is very reasonable considering all of the problems he’s had getting this flooring completed.
Damage Clause
In May we had the conversation with Luke and Adam about the $5,000/mo damages clause that we have with the homeowner if the job is not finished on time (See attached email to Luke). We asked both of them to get with [the supplier] and have that paid to you and in turn you would pay us since both the expired grout and hazing issues were definitely going to cause the project to be delayed. Our client has already taken this off of what he owes to us. We will be deducting this from your final invoice.
Furniture Repair
Also, your workers drug [sic] an office desk on its side and scratched the entire side of the desk. It’s a $3,000 desk. The client is stating it will be $500 to fix the desk. This will be deducted from the final invoice.
Tile Cleaning Breakdown - $8,165
Labor for 6 days, 2 workers (96 hours) - $7,200
Cleaning Machine Rental - $805
Stripping agent and scrub pads - $160
The total for all deductions comes to $16,165, which does not include replacing of the cracked and chipped tiles. Please forward an invoice for the final amount owed to you of $3,987.25. Thank you!
12. After the exchange of the August 17, 2023 email, the parties came to an impasse as to who should be blamed for the hazing issue that for at least a time affected the tiling project. At hearing, the parties blamed each other for the problem. Complainant contended (1) that the problem was a homeowner who was overly critical of the tile installation, (2) that Complainant performed its installation of the tiles in a workmanlike manner, and (3) that Respondent breached the contract by failing to pay the amount due on the last invoice. In contrast, Respondent contended that (1) Complainant caused the problems with the hazing and the broken or chipped tiles that needed to be replaced, (2) that Complainant’s workmanship was the cause of the problem and (3) that the deductions were proper in light of Respondent’s contention that the tile installation was not performed in a workmanlike manner.
CONCLUSIONS OF LAW
1. The Registrar has jurisdiction over this matter pursuant to A.R.S. §§ 32-1101 et seq. and 32-1154(A). The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.
2. Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.
3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”
4. A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license:
[f]ailure by 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. “Statutes should be interpreted to provide a fair and sensible result.” In addition, “[s]tatutes shall be liberally construed to affect their objects and to promote justice.”
6. In the present case, the preponderance of the evidence shows that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant monies owed for services performed and materials supplied, when due, without sufficient justification or excuse as allowed by statute. Respondent does not dispute that even by its own calculations, it failed to pay Complainant $3,987.25.
7. In addition, the $5,000.00 liquidated damage charge that Respondent paid to the homeowner as a result of a liquidated damages provision in Respondent’s contract with the homeowner could not be charged to Complainant. This is so for at least two reasons. First, Complainant’s contract with Respondent did not have a liquidated damages provision for untimely completion. Moreover, Respondent’s argument that Complainant is responsible for the liquidated damages Respondent paid to homeowner is clearly undercut by Respondent’s May 30, 2023 email to Complainant. Respondent stated unequivocally in that email that the liquidated damages it paid to the homeowner due to the invocation of the liquidated damages clause in its contract with the homeowner came as a result of the supplier’s failure to provide a good grout product, not any action attributable to Complainant. There is no cognizable basis under these circumstances--and Respondent has not proven any such basis--upon which the payment of the liquidated damages provision could be ascribed to Complainant’s conduct and therefore back charged to Complainant. Respondent thus clearly owes Complainant a minimum of $8,987.25 ($3987.25 + $5,000.00 = $8,987.25).
8. With respect to the balance of the amount Complainant seeks (an additional $10,850.00 plus late fees), there appears to be a legitimate contract dispute between the parties. The Registrar historically has not used such contract disputes as a basis to sanction a license, finding that amounts claimed to be due and owing which are the subject of a legitimate contract dispute are not considered liquidated and therefore not properly the subject of a Registrar’s licensing proceeding. While this tribunal has found that a liquidated amount in excess of $750.00 exists in this case upon which a violation of A.R.S. § 32-1154(A)(10) can be found, this tribunal also finds that there is a component of the amount Complainant seeks (the $10,850.00 and late fees over and above the $8,987.25 clearly due and owing) that is the subject of a legitimate contract dispute. Therefore, this tribunal makes no finding with respect to whether or not the additional $10,850.00 and late fees are owed to Complainant.
9. Based on the relevant and credible evidence in the record, it is appropriate for the Registrar to discipline Respondent’s license, including suspension or revocation, pursuant to A.R.S. § 32-1154(B) unless Respondent remits monies owed to Complainant.
RECOMMENDED ORDER
Based on the foregoing findings of fact and conclusions of law,
IT IS RECOMMENDED that on the effective date of the FINAL ORDER in this matter, Robby Geneal Chima, DBA: Magna Construction, License No. ROC 337352 shall be suspended for three (3) business days.
IT IS FURTHER RECOMMENDED that thirty calendar days after the effective date of the FINAL ORDER in this matter, the Registrar shall suspend Respondent’s contractor’s license until Respondent has provided to the Registrar, and the Registrar has accepted, documents that establish that it has paid Complainant Atomic Construction LLC, eight thousand nine-hundred eighty-seven dollars and twenty-five cents ($8,987.25) in certified funds. Upon timely receipt of such satisfactory written proof, the Registrar may close the complaint in Case No. 2023-13073.
Done this day, April 8, 2024.
/s/ Greg Hanchett
Chief Administrative Law Judge
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.
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]
Kristin Rooney, Esq.
Atomic Construction LLC, Complainant
6839 W. Pershing Ave.
Peoria, AZ 85381
[email redacted]
Robby Geneal Chima, Respondent
dba Magna Construction
2349 W. Impala Ave.
Mesa, AZ 85202
[email redacted]
By: OAH Staff