ALJDEC

98F-0227-ROC · Registrar of Contractors · 1998-01-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 7, 1998 in Phoenix, Arizona.

APPEARANCES: For Complainant, Mrs. Cathy Snyder, wife of C. Eugene Snyder, qualifying party. For Respondent, Mike Brownfield, President.

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn _____________________________________________________________________

The hearing in this matter was held for the purpose of determining whether Respondent violated state law as alleged by Complainant and as cited by the Registrar of Contractors (“Registrar”). Testimony and evidence was taken into the record. The matter was taken under advisement and the hearing was concluded at the time of the hearing. Based on the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made: FINDINGS OF FACT 1. This matters arises out of Complainant’s claim against Respondent that Respondent has failed to pay Complainant a sum due for services and/or materials provided to Respondent. 2. Complainant was the original electrical subcontractor on a project at the Durbin residence, at 15823 E. Greystone in Fountain Hills, Arizona. Under a revised May 1996 plan, a $12,610.00 contract was drawn up in January 1997, and work began on the project, apparently in March or April 1997. The contract called for payments of 35% due on half of the rough-in being done, another 35% due on completion of rough-in, and the remaining 30% on completion of trim-out. 3. In April 1997, there were some change orders. The first change order resulted in additional $2025.00 due; and the second change order resulted in additional $1010.00 due. According to Respondent, Homeowner and Respondent made some verbal agreements with regard to some, or all, of these change order amounts at the site. Respondent testified that Gene Snyder from Complainant was present at the meeting. These agreements had to do with some direct payment from Homeowners to Complainant [$4321.00], and some direct payment from Respondent to Complainant [$260.00]. Respondent reduced these agreements to written notes, and the Homeowners signed off on the notes. 4. Respondent testified that Complainant only performed the work of change order #1, and that change order #2 was done by an outside source. Respondent alleged that the Homeowners made arrangements with Complainant’s employees to do some additional work, and that the homeowners eventually hired another contractor to finish the work due to dissatisfaction with Complainant. Respondent testified that his services were terminated July 16, 1997 by Homeowners, after the Complainant had completed the rough-in but before the trim stage. 5. Respondent presented a copy of a November 6, 1997 letter Homeowners had written to the Registrar regarding a $3,000.00 payment to Complainants for purchase and installation of the fixtures/trim, which monies Homeowners were seeking Registrar’s assistance in the recovery of. Hearing Exhibit R-A at Tab 20. That letter recites that there was $4,300.00 in extras, and the $3,000.00 was to be subtracted from that amount, with the remainder to be paid on completion. It appears that Respondent secured that copy from this tribunal’s case files, as it contains a received stamp of this tribunal. Respondent also presented a copy of the Homeowners’ check in payment of the $3,000.00. It appears that Respondent secured this copy from the Registrar’s files, as it contains received stamps of Registrar. Hearing Exhibit R-A at Tab 21. 6. At the hearing, Complainant’s representative, Mrs. Snyder, testified that they do not deal with Homeowners, but only the general contractor, and that she expected payment of the contract and change order amounts due from Respondent. However, Mrs. Snyder was not said to be present at the site meeting, and Mr. Snyder did not arrive at the hearing or present any evidence in contravention of this written evidence on direct payments to be made. At the hearing, Mrs. Snyder did admit that she knew that one of its employees did some work directly for the Homeowners. She further stated that after July 16, 1997, she was out of the loop on the deal; presumably due to the Homeowners’ termination of Respondent’s services. 7. Complainant issued billings or invoices to Respondent: a. On 3-19-97 for the first 35% rough-in [$4413.00]; b. On 4-2-97 for the first change order [$2025.00]; c. On 4-4-97 for the second 35% rough-in [$4414.00]; and d. On 4-25-97 for the second change order [$1010.00].

Complainant’s pre-printed billing forms state at the bottom, that a service charge of 2% will be levied on thirty day past due amounts, compounded monthly. 8. Respondent issued a check [#2092] for $4,413.00 on April 21, 1997. Respondent testified that Complainants advised him they lost the check, and Respondent testified that it then issued a stop payment on the check. Respondent then issued a check [#2133] for $7,250.00 on May 8, 1997. Respondent testified that this amount represented an amount attributable to the first amount billed and to the work completed to the time he wrote the check. Respondent testified that Check #2133 was cashed. Respondent further testified that, despite the previous assertion that Complainant had lost the check, and the subsequent stop payment on it, that Check #2092 was also cashed by Complainant six months later. Although Respondent asserted at the hearing that he had the actual canceled checks, he did not bring those to the hearing, but rather copied the face of the two checks. See Hearing Exhibit R-A at Tab 14. However, Complainant did not deny cashing the Check #2092. 9. Respondent’s Hearing Exhibit, R-A at Tab 1, alleges, and he testified, that he paid the $260.00 (from the verbal agreements) to Complainant on March 31, 1997. Complainant did not deny receiving the $260.00 payment. 10. Respondent asserts that Complainant was paid the base estimate amount of $7,250.00 (as shown on the bank or mortgage papers), was paid the $3,000.00 from Homeowners, and had cashed the stop-payment check of $4,413.00. Respondent asserts that Complainant has been paid in full for the work they did, and no other amount is due. Respondent asserts that, in fact, Complainant has been overpaid on the project. 11. Complainant asserts that they entered the contract in good faith, and should not be dragged into the dispute between the homeowners and the Respondent. In her rebuttal, Complainant stated that they completed the rough-in, and never started on another portion of the work. Complainant asserts that the amount of money still owed to them is the sum of the 70% rough-in and the two change orders less the $7,250.00 payment, for a total of $4,612.00, which excludes the interest or late fees. Complainant agrees that not all the work was done; indicating that 30% of the contract was not done. 12. Complainant asserts that the parties’ signatures are on the contract and change order papers, that the parties wanted and approved the change order items, and that the contract and change order amounts are due to Complainant. Complainant essentially asserts that if the amounts were contracted for, then they are due. Mrs. Snyder testified that they got the $7,250 check, but that were owed over $10,000 at the time, and that Respondent had told Gene Snyder that Complainant would be paid the difference. 13. In response to questions, Mrs. Snyder admitted receiving the Durbins’ check of $3,000. Mrs. Snyder believes that the Durbins’ check does not pertain to Complainant’s dispute with Respondent on the contract and the change order amounts, explaining the $3,000 was payment for purchasing what would have been the trim portion of the contract. APPLICABLE LAW A.R.S. §32-1154.A. provides, in the following relevant portions, that a holder of a license or a person listed on a license shall not commit the following: 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. xxx 11. Failure by a licensee or agent or official of a 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 or, 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. xxx 23. Failure to take corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving written directive from the Registrar... . CONCLUSIONS OF LAW 1. To warrant action by the Registrar pursuant to the statutes above, Complainant must demonstrate by a preponderance of the evidence that Respondent violated any one of the statutes. 2. There was no testimony or evidence with regard to failure to comply with Registrar directives or unworkmanlike efforts on the part of Respondent. Therefore, there can be no violation found of A.R.S. §32- 1154(A)(23). 3. With respect to Respondent’s alleged wrongful conduct regarding payment on the contract, Complainant has not sustained its burden of demonstrating a violation. Respondent presented its defense, and compelling testimony, of additional payments made with regard to this contract, which testimony evidences a good faith dispute between the parties concerning whether payment to Complainant is properly due and owing. This good faith dispute, therefore, precludes a finding that a valid and liquidated sum is owed to Complainant. 4. The Registrar is not empowered by law to adjudicate amounts alleged to be due and owing in the face of a good faith dispute on such amounts. Therefore, until and unless the claimed obligation is reduced to judgment by a civil court or competent jurisdiction, no violation by Respondent may be supported. Complainant has not sustained the requisite burden of proving the existence of a valid, liquidated debt properly due and owing by Respondent, nor the burden of proving that Respondent had committed the violations charged by Registrar. RECOMMENDED DECISION 1. In view of the foregoing, it is recommended dismissing the matter. RECOMMENDED and DATED this day: January 26, 1998.

______________________________________ Kay A. Abramsohn Administrative Law Judge

Foregoing mailed this ____ day of January, 1998, to:

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

By ___________________________ -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 PH (602) 542-9826 / FAX 542-9827