ALJDEC

98F-1208-ROC · Registrar of Contractors · 1998-08-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 21, 1998 APPEARANCES: Chris Lonn, Esq., on behalf of the Complainant Adam Weber, Esq. and Ari Schwartz, Esq. on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

FINDINGS OF FACT On or about November 20, 1996, the Complainant and Respondent entered a contract whereby the Complainant would provide the labor and materials to do the stucco work at a custom home being built by the Respondent in Fountain Hills, Arizona. The cost of the home was in the four to five hundred thousand dollar range. The amount of the contract was $18,011.00, which amount was payable upon completion of the work (“…full complete and timely performance…”). A retention provision in 3 (e) of the contract is marked “…n/a percent 0%…”. The Complainant began performance under the contract and submitted an invoice for $10,806.60 (billing for lath draw), to the Respondent on January 4, 1997. Respondent paid the Complainant. During the course of the construction, there was disagreement between the Respondent and Kenneth and Wanda Jenkins, the owners of the home being built, regarding approval of draws by the owners. Work on the construction stopped for a period of time and then resumed. Progress payments to the Respondent were to be made on certification by the lender based on inspections and stage of completion in accordance with the loan agreement. After completing the stucco work, the Complainant submitted an invoice dated April 9, 1997, in the amount of $7,204.40, to the Respondent. The home was approximately 60% completed at the time the stucco was completed. The Complainant did some additional agreed upon stucco work for the Respondent and submitted an invoice dated May, 5, 1997, in the amount of $480.00. The Respondent failed to pay the Complainant the amounts claimed under the last two invoices. The parties had numerous discussions about payment until the Respondent asserted payment was somehow dependent on recovery from the owners. The Respondent continued working on the home until approximately the end of July, 1997, when there was another dispute between the owners and the Respondent. The owners have paid the Respondent all but $29,657.00 on the quoted cost for construction. The Respondent and owners are in civil litigation regarding the $29,657.00. The Respondent owes various subcontractors including the Complainant, approximately $40,000.00, on this project. The Complaint in this matter was filed with the Registrar of Contractors (Registrar), on November 19, 1997. The owners had also filed a complaint against the Respondent with the Registrar. One of the issues related to the stucco work. A Corrective Work Order (CWO) issued to the Respondent on November 24, 1997, requires correction of cracks on the stucco. CONCLUSIONS OF LAW The allegations of the Citation and Complaint concern A.R.S. §32- 1154(A)(7), wrongful or fraudulent act, (A)(11), failure to pay for goods and services when having the capacity to do so, and (A)(23), failure to take corrective action. A.R.S. §32-1154(A)(23) does not apply to the facts of this case and should be dismissed from the Citation and Complaint. An argument which was raised by the Respondent includes a provision in the contract section 3(e)(iv) which references payment of retained amounts upon approval by certain entities including the owners. This provision is not applicable to the case because the contract clearly states “n/a percent 0%” with respect to any retention and final payment. Since no retention was agreed to in the contract, any subsequent clause conditioning payment of any retention, is inapplicable. Another argument by the Respondent concerns the complaint filed with the Registrar by the owners. One of the complaints is about the cracks in the stucco. The evidence shows this complaint was months after the stucco work was completed and that the Respondent never mentioned the issue to the Complainant during numerous discussions regarding payment of amounts owing. It is rather evident that this was not the reason for non payment. Based on the evidence, the Respondent’s cost of building the home exceeded the agreed upon price between the Respondent and the owners by at least $10,000.00 (owners allegedly owe Respondent $29,657.00 and the Respondent admits to still owing subcontractors $40,000.00). Despite the above, the evidence also shows that the Respondent was paid over 90% of the cost of building the home, an amount of $400,000.00 or more. The Complainant had finished his portion of the work when 60% of the home had been completed. The reasonable conclusion is that the Respondent was paid for the Complainant’s portion of the work well before the Respondent left the job and that the asserted $29,657.00 deficit is not related to, and cannot be legitimately used to claim a lack of capacity to pay for the Complainant’s work. The Respondent presented no acceptable justification for failing to pay the Complainant. In view of the Respondent’s testimony that other subcontractors that worked on the Jenkins’ home were still working for the Respondent, it would appear that the Respondent has paid others with money which should have been paid to the Complainant. Based on the above, a violation of A.R.S. §32-1154(A)(11) is found. RECOMMENDED ORDER In view of the foregoing it is recommended that commencing on the effective date of the Order entered in this matter, that the Class B license of the Respondent shall be suspended until the Registrar of Contractors receives written proof that the Respondent has paid or tendered payment to the Complainant, in the amount of Seven Thousand-Six Hundred Eighty- Four and 40/100’s ($7,684.40) Dollars; It is further recommended that if the Respondent pays or tenders payment of the above amount on or before the effective date of the Order entered in this matter, then the . . . . . . aforementioned suspension shall not take place and the Citation and Complaint upon which it is based shall be closed. Done this day, August 24, 1998.

_________________________________ ALLEN REED Administrative Law Judge

Original transmitted by mail this ____ day of August, 1998, to:

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

By _______________________________

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