ALJDEC - Licensing
2024A-03831-NPC-ROC · Registrar of Contractors · 2024-08-02
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
S A K Electric and Plumbing Inc.,
COMPLAINANT,
v.
Modern Build Construction LLC
ROC License No. 321538,
RESPONDENT.
No. 2024A-03831-NPC-ROC
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: July 22, 2024 at 9:00 AM.
APPEARANCES: Joseph Hammer appeared on behalf of S A K Electric and Plumbing Inc. (“Complainant”). Peter McGuire appeared on behalf of Modern Build Construction LLC (“Respondent”) with Terry Dieken as a witness. Justin Paige, Michael Walsh, and Linda Dieken observed.
ADMINISTRATIVE LAW JUDGE: Jenna Clark.
EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Contested Case (“Notice of Hearing”), including the referring agency’s administrative file (“Agency File”), Hearing Order dated June 07, 2024, Complainant Exhibits A & C-D, and Respondent Exhibits A-E 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
On September 07, 2018, the Registrar issued ROC License No. 321538 for General Dual KB-2 Residential and Small Commercial contracting to Respondent. Peter William Maguire is listed on the license as the Qualifying Party and Member. The address of record for the license is 4500 N. 32nd St., Ste. 201-G Phoenix, Arizona 85018.
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. 321538, such prior license record reflects that Respondent’s license is active, in good standing, and renewed through September 30, 2024. Respondent has a $14,000.00 surety bond for the license issued through RLI Insurance Company, effective December 29, 2020. The license has no prior disciplinary record. 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 early-April 2024, 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 invoices totaling $13,861.00 for subcontract performed by Complainant per its contract with Respondent. The Registrar designated it Complaint No. 2024-03831 and assigned the case to Tedi Quezada in their legal department for investigation.
On April 09, 2024, 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 April 16, 2024.
Respondent did not provide a response.
On May 01, 2024, 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 May 16, 2024, 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 May 15, 2024, the Registrar received Respondent’s timely Answer whereby Mr. Maguire generally denied the alleged violation of Ariz. Rev. Stat § 32-1154(A)(10) and asked for Complaint No. 2024-03831 to be dismissed. On May 23, 2024, the Registrar denied Respondent’s dismissal request.
On May 24, 2024, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on July 22, 2024. Per the Notice of Hearing on Contested Case (“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
Complainant called Joseph Hammer as a witness. Peter Maguire and Terry Dieken testified on behalf of Respondent. The substantive facts of record are as follows:
On an unknown date, Terry and Linda Diekin hired Respondent to construct a new residential build at 14845 S. 30th Pl. Phoenix, Arizona 85048.
On October 27, 2021, Complainant and Respondent entered into a $48,989.00 labor and materials subcontract agreement for concrete; a $10,658.00 labor and materials subcontract agreement for electrical; and a $25,980.00 labor and materials subcontract agreement for plumbing on the Diekin’s project. The subcontract agreements between the parties totaled $85,627.00.
Work on the project commenced in July 2022.
Complainant billed Respondent monthly, with a net-30 payment(s) due date. In turn, Respondent took Complainant’s invoices to Mr. Diekin, who approved the invoice(s) and tendered payment to Respondent for issuance to Complainant. Mr. Diekin never paid Complainant directly.
In or around late-Fall of 2023, the Diekens became dissatisfied with Complainant’s workmanship on their project. Their dissatisfaction was solely conveyed to Respondent, who in turn, delayed in relaying their dismay to Complainant until Winter of 2023.
On December 11, 2023, Complainant issued Invoice #2601 to Respondent for $9,660.00.
On December 13, 2023, Complainant issued Invoice #2603 to Respondent for $3,780.00.
On December 22, 2022, Respondent asked for a “break down” of billable hours for Invoice #2603, and informed Complainant that it would be “charged back” for the cost of repairs due to Complainant’s alleged poor workmanship.
On January 19, 2024, Respondent issued Complainant a list of 10-items that purportedly needed to be repaired and/or replaced by Complainant on the project.
On February 06, 2024, Complainant inquired with Respondent regarding payment for Invoice #2601 and Invoice #2603.
On February16, 2024, Complainant issued Invoice #2779 to Respondent for $950.00, less a $650.00 credit.
On February 26, 2024, Complainant issued Invoice #2810 to Respondent for $715.00, less a $600.00 credit.
On March 14, 2024, Complainant inquired with Respondent regarding payment for Invoice #2601, #2603, #2779, and #2810.
On March 18, 2024, Mr. Maguire again asked for a “break down” of Complainant’s invoices, “[S]o that I can understand what my clients the Dieken’s are actually getting billed for and all I get [is] a list of hours your employees spent on the job site ... nothing breaking down that those hours you are trying to bill for are for fixing deficiencies from your employees that had to be address [sic] to get fixed.” Per Mr. Maguire, Complainant had overcharged $24,405.25 on the project, as Complainant had been paid a total of $110,032.25 on the project by that date.
On March 26, 2024, Mr. Maguire informed Complainant that he and Mr. Deiken were reviewing their invoices and would substantively reply by the end of that week.
On March 29, 2024, Mr. Maguire informed Complainant that he and Mr. Deiken determined that there were “too many discrepancies” to determine which party owed which what amount, and offered to settle the underlying dispute with a one-time payment to Complainant. On April 03, 2024, Complainant declined.
Additional Evidence
On March 12, 2024, the local building authority inspected the Dieken’s build to determine whether a Certificate of Occupancy could be issued. At that time, the inspector determined that it could not because an electrical panel installed by Complainant had not been done per approved plans and specifications. Because Respondent was concerned that Complainant would not be able to make appropriate repairs prior to the expiration of Respondent’s building permit on May 08, 2024, Respondent decided to terminate Complainant from the job and hire another licensed contractor to perform corrective work. Ultimately, the project was completed without Complainant in late-April 2024.
On April 30, 2024, a Certificate of Occupancy was issued by the local building authority.
Closing Arguments
In closing, Complainant opined that it had sustained its burden of proof and argued that because Respondent had paid all prior invoices on the Diekens project that Respondent was responsible for paying Complainant’s final invoices on the project since the work had been completed prior to its termination. Complainant also argued that but for Respondent’s refusal, Complainant would have worked to remediate any deficiencies in its workmanship. Complainant concluded by asking the Tribunal should issue an Order in its favor that included restitution.
In closing, Mr. Maguire argued that it was the Diekens, not Respondent, who was responsible for payment on Invoices #2601, #2603, #2779, and #2810. Mr. Maguire further argued that notwithstanding liability, Respondent did not have the means or capacity to pay Complainant $13,861.00.
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 in this case are clear.
The relevant and credible facts clearly establish that Respondent hired Complainant for labor and materials subcontract agreements on the Deiken’s new residential build project for a total of $85,627.00. The record also reflects that Complainant issued its net-30 invoices directly to Respondent, and that Respondent’s remitted payments to Complainant on behalf of Mr. Dieken were unbeknownst to Complainant. The record also reflects that after the Diekens became dissatisfied with Complainant’s workmanship they stopped paying Respondent for Complainant’s invoices. The record also reflects that Complainant was not permitted to perform corrective work on the project, and was instead replaced by another subcontractor. The record further reflects that at the time Complainant was terminated from the project, there were four (4) outstanding invoices totaling $13,861.00 pending payment.
Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to tender payment in full to Complainant on Invoices #2601, #2603, #2779, and #2810. This is an affirmative defense that Respondent bears the burden to establish. This burden has not been sustained. Here, Respondent was the general contractor on the underlying project who paid Complainant directly. The project owner’s refusal to pay the invoices at issue might have outweighed Respondent’s contractual obligations to remit payment for them, but for Respondent’s admission that Complainant was not advised of alleged workmanship issues until just prior to its termination and was precluded from performing any corrective work. Moreover, Respondent failed to provide any proof of insolvency or inability to pay the outstanding debt owed.
Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant also established cause for the Registrar to discipline ROC License No. 321538.
RECOMMENDED ORDER
Based on the foregoing,
IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Modern Build Construction LLC, ROC License No. 321538, shall be suspended until Respondent provides the Registrar with sufficient proof that $13,861.00 has been tendered to Complainant in certified funds as restitution.
IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint 2024-03831 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.
NOTICE
Pursuant to Ariz. Rev. Stat. § 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 02, 2024.
Office of Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted electronically to:
Tom Cole, Director
c/o Legal Department
Registrar of Contractors
1700 W. Washington St., Ste. 105
Phoenix, AZ 85007
[email redacted]
Modern Build Construction LLC, Respondent
c/o Peter McGuire, Agent
4500 N. 32nd St., Ste. 201G
Phoenix, AZ 85018
[email redacted]
S A K Electric and Plumbing Inc., Complainant
c/o Joseph Hammer, Agent
56 S. Meridian Rd.
Apache Junction, AZ 85120
[email redacted]
By: OAH Staff