ALJDEC

97F-2485-ROC · Registrar of Contractors · 1997-10-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The above-entitled matter came on for hearing on October 3, 1997. The Complainant was represented by its attorney, Eugene A. Petrovits, Esq., and the Respondent was represented by its attorney, William F. Doran, Esq. Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. At all times material herein, Respondent was and is a Limited Liability Corporation holding Class B general contractor’s license number 118390 issued by the Registrar of Contractors. Gerald C. Trier serves as the qualifying party and as one of the managers on the license.

2. Pursuant to a written subcontract agreement, Complainant agreed to and did perform concrete work on a residential jobsite for which Respondent was serving as the project’s general contractor. The total contractual cost price was specified to be $9,535.00.

3. The dominant portion of the contemplated concrete work, consisting of the stem walls and the floor slab, was completed by Complainant in two stages, the last of which was in early February, 1997. The remaining

work under the subcontract, which was the installation of the concrete driveway apron and the sidewalks, was intentionally not completed at that time so as to enable ongoing jobsite construction activities without risk of damage to such surfaces by other tradesmen.

4. In early February, 1997, Complainant transmitted a billing of $8,785.00 to Respondent for the duly completed concrete stem wall and slab work, reflecting a deduction from the stated total subcontract price for the incomplete driveway and sidewalk in the amount of $750.00. Such allocation was not shown to have been arbitrary or unreasonable.

5. It was not effectively disputed that no portion of the aforesaid monetary amount billed by Complainant has been paid or tendered by Respondent, despite numerous and repeated requests and demands. Credible testimony and documentary evidence tended to indicate that the entire amount due or to be due for all of the concrete work subcontracted to Complainant was specifically included as part of the third periodic draw requested by Respondent from the property owner, which draw application was fully paid to Respondent in late February, 1997.

6. Notwithstanding an offer by the lending institution to transmit payment of Complainant’s invoice directly to Complainant, an election was made by Respondent to decline such offer and, instead, to receive into its own possession all funds from the draw. Such funds were to be held by Respondent until certain questions about the jobsite condition and appearance of the concrete could be discussed and resolved with Complainant after a meeting that was to be arranged.

7. The desired meeting never materialized, although Complainant did return for an examination and evaluation of the finished concrete work, promptly reporting the favorable results telephonically to Respondent.

However, payment by Respondent against Complainant’s invoice was not forwarded, but rather, Respondent admittedly utilized the monies from the third draw allocable to the concrete portion of the construction work for other purposes, ostensibly related to the same project, perhaps intending to subsequently remit against Complainant’s invoice out of the next progress draw to be received from or on behalf of the property owner. However, such future draw was never received by Respondent due to the experiencing of serious problems with the property owner culminating in the termination of Respondent's general contracting functions on the project and the onset of civil litigation between them.

8. Preprinted provisions in the parties’ subcontractual agreement in the nature of a “pay when paid” clause, purporting to render all payments to Complainant, as a subcontractor, wholly contingent upon Respondent’s receipt of funds from the property owner, are found and determined not to have made Complainant an insurer that Respondent would be fully paid under its general contracting agreement. Mindful of the prevailing reluctance of civil tribunals to enforce such contract terms and to look with disfavor upon defenses based thereon, the maximum impact in this case of the wording contained in the written subcontract between these parties would be to generate a reasonable deferment of any applicable due date of a particular payment. In any event, irrespective of any judicial or quasi- judicial interpretations of similar contractual language, under all the facts and circumstances of this case, a finding is warranted that earmarked funds relating to Complainant’s work had, in fact, been paid to Respondent, no part of which was transmitted to Complainant.

9. The actual concrete work performed by Complainant was sufficiently shown by the testimonial, documentary and photographic evidence to have complied with all requirements of applicable building codes and with all prevailing workmanship standards and tolerances. Additionally, a

credible showing was made that the property owners are not and had never been dissatisfied with Complainant’s concrete work, nor had they communicated any objections with respect to the aesthetic appearance or the location and size of some relatively minor and reasonably anticipated surface cracks or intentionally installed control joints.

10. Respondent’s breach of its contractual payment obligations is further determined to constitute a wrongful (but not fraudulent) act to the financial detriment of Complainant within the meaning of one of the contracting law violations charged hereunder.

11. Neither the testimony of the Registrar’s assigned Inspector at the hearing nor his prior issuance of a form letter to Respondent is found to support any finding that there was ever any valid written directive to pay Complainant a fixed sum of money. The specific language contained in such form letter providing, in part, that “Should the charges contained in the complaint be correct, please contact the complainant and arrange for the resolution of the matter….." (emphasis added) appears more consistent with an interpretation that the Inspector is NOT making any determination as to the claim's validity and, therefore, is not directing payment by the Respondent of a sum certain. Additionally, any treatment of this letter as a directive is made even more difficult due to the use of the word “resolution,” since any bona fide offer to pay only a minor portion of the claim set forth in the complaint, whether or not rejected, may properly be deemed to be an attempt to resolve the matter on the part of the contractor to whom the form letter is sent. No finding of a violation of the statutory subsection relating to non-compliance with written agency directives is supportable in this case.

12. Notice is taken of the Registrar's license records which reveal that Respondent’s Class B license had been suspended by operation of law since April 13, 1997 for lack of a bond and, perhaps somewhat inexplicably in light of the pendency of the instant complaint, was allowed to be canceled on July 7, 1997 to coincide with the issuance of another Class B license Number 125585 to Cactus Springs Enterprises, L.L.C., a different Limited Liability Corporation entity in which Mr. Trier and his wife are the sole managers and in which he also serves as qualifying party.

CONCLUSIONS OF LAW

1. The totality of the evidence of record adequately established that Respondent has violated the provisions of A.R.S. §32-1154A (11) and (7) [wrongful act]. However, no violation by Respondent of A.R.S. §32-1154A (23) was sufficiently proven hereunder.

2. The canceled license status of Respondent does not preclude the pursuit by Complainant of its administrative remedies nor the conducting of these disciplinary proceedings. Moreover, the terminated status of such license must be considered when formulating an appropriate Order in this action. Since little or no motivation would exist for any contractor to undertake and complete any remedial measures to avoid the imposition of a suspension of an already-canceled license, the non-compliance by Respondent with any condition deemed proper for inclusion in the Order to be entered hereunder should result in the revocation of Respondent’ s license, which, in turn and in due course, will lead to the initiation of appropriate disciplinary action pursuant to A.R.S. §32-1154A(21) against the newly issued separate license on which the same individual is listed as a “person” as defined in A.R.S. §32-1101A(5).

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the Class B license of Respondent be revoked on the effective date of this Order (thirty-five [35] days after the date of mailing by the Registrar).

It is further recommended that if Respondent pays or tenders, or causes the payment or tender of, the sum of $8,785.00 to Complainant on or before this Order’s effective date, then the above-provided license revocation shall not be imposed, but instead, the license of Respondent shall be deemed to have terminated in good standing.

Dated: October 8, 1997. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert. I. Worth Administrative Law Judge

Original transmitted on ___________________

by: _________________________ , To:

Mr. Michael P. Goldwater, Director Registrar of Contractors 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Jennifer Varela -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826