ALJDEC

98F-1209-ROC · Registrar of Contractors · 1998-05-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 22, 1998.

APPEARANCES: Complainant, Mike’s Construction, appeared through its owner and qualifying party, Miguel Esquivias.

Respondent, Niagra Pools, appeared through its President and qualifying party, Gordon Anthony Jiroux.

ADMINISTRATIVE LAW JUDGE: Robert. I. Worth _____________________________________________________________________

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. Pursuant to ongoing arrangements between the parties, extending over almost a two year time period, Complainant performed specified work as a specialty subcontractor for numerous pool projects on which Respondent was the general pool builder. The work consisted of the applying either plaster, pebble-tec or acid washing materials to the pool and/or spa surfaces. The subcontract prices were computed for the contemplated work on each jobsite based upon applying a rate derived from a price list to the measured pool surfaces.

2. The originally filed complaint in this action asserted a failure by Respondent to pay the total of $8,758.00, representing the aggregate amounts invoiced for Complainant’s work on seven different residential pool projects completed from late August, 1997 through late October, 1997. It was admitted that after the complaint was

filed but before the formal Citation was issued, Respondent transmitted the sum of $2,160.00 in December, 1997 representing the full amounts of the invoices for three of the seven identified projects, leaving an unpaid balance claimed by Complainant in the sum of $6,598.00.

3. The obligation for paying the above-described total balance was the subject of a dispute on the part of Respondent, which appeared not only to be asserted in good faith but also, as shown by the evidence adduced at the hearing, to have a sound and persuasive basis. One of the remaining four projects invoiced by Complainant for the sum of $1,536.00 and not paid by Respondent related to the Dorf pool. The results of the work performed by Complainant were such that, in order to insure against any adverse action upon its own license following a lack of any effective response from Complainant, Respondent understandably resorted to another contractor for the accomplishment of necessary remedial work on visible plaster deficiencies. Such measures were shown to require the complete removal of all plaster materials applied by Complainant and a total replastering of the pool at a cost to Respondent of $3,700.00, which greatly exceeds the sum invoiced by Complainant for that project.

4. The filing of a separate Registrar’s complaint against Complainant by Respondent followed Complainant’s inaction or ineffective action to rectify the reported and established workmanship problems after having been afforded notice and an opportunity to do so. Respondent was led to believe that its cross-complaint based on Complainant’s work on the Dorf project would be addressed in the hearing of this non-payment case and, inadvertently, allowed that complaint to be administratively closed by the Registrar’s compliance department. Any such closure is found not to be equated with the satisfaction of that underlying complaint nor to be indicative of the resolution of the dispute as to that jobsite work. Under the circumstances, as explained, a re-opening of Respondent’s complaint against Complainant relating to the Dorf project is still possible.

5. The Dorf project was not the sole element of the overall dispute between the parties. Credible evidence presented by Respondent in defense of the instant claim revealed that Complainant’s subcontract work for Respondent on three other projects

had developed problems with the pool plaster soon after it had been applied. It was further demonstrated that Complainant was generally unresponsive to numerous and repeated requests and demands to correct these reported plaster problems. One of the three other projects involved the Palopoli pool and was the subject of a complaint by the homeowner directly against Complainant which resulted in the issuance of written directive by the Registrar’s assigned Inspector, the service of a formal Citation and the entry of a default Order containing a provisional revocation of Complainant’s license conditioned upon the timely correction of the plaster deficiencies. The homeowner, Mr. Palopoli, gave credible testimony at the hearing. The Registrar’s Order, although not yet final, may properly be considered and evaluated as bearing upon the good faith nature of the dispute by Respondent with respect to its liability, if any, to pay the balance of the invoiced sums to Complainant. Another of the remaining three other projects was at the Abundo home which, triggered by Complainant’s uncorrected plaster work, resulted in the filing of a complaint by Abundo against Respondent’s license.

6. There was little doubt that the respective positions of the parties, as presented at the hearing, confirm that the monetary amount claimed past due and owing to Complainant is subject to a dispute, the grounds for which cannot be held to be unreasonable or arbitrary on the part of Respondent. Nothing in Complainant’s documentary or testimonial evidence serves to dispel the fact that a dispute exists between these parties, and no element of Respondent’s bad faith in asserting such dispute may reasonably be inferred. Since the Registrar of Contractors is not statutorily empowered to adjudicate and award money damages, no violation of the code sections charged in the Citation would be supportable unless and until the amount claimed due is liquidated and reduced to a sum certain by a judgment of a civil court of competent jurisdiction.

7. Based upon the demonstrated bona fide dispute as to the monetary amount, if any, properly owing to Complainant by Respondent, the instant claim for $6,598.00, representing the allegedly unpaid and past due subcontract balances, set forth in the filed complaint, as subsequently amended or reduced to reflect credit for payments to Complainant of part of the originally claimed amount, must be held not to constitute a

liquidated sum which is an essential element for any finding that Respondent failed to pay monies when due within the purview of the State’s contracting laws.

8. Nothing in this decision is intended to constitute a determination as to validity of claims for unpaid contract balances, legitimate set-offs, justifiable back-charges or potential counterclaims. These determinations must properly be made by a civil tribunal which is the more appropriate forum for the resolution of this monetary dispute. Stated alternatively, the termination of the instant administrative proceeding shall be expressly without prejudice to the civil pursuit by the respective parties of their rights, defenses, set-offs or counterclaims, with the exception of one of the charged contracting law violations discussed in the following Finding of Fact.

9. It did appear from the case file, and it was also admitted during the hearing testimony of both parties, that no written directive had been issued by the Registrar’s assigned Inspector requiring the payment by Respondent of any sum certain to Complainant. The wording of a form letter seeking to prompt Respondent to resolve the filed claim, if valid, cannot be equated with the issuance of an order for specific remedial action. The absence of any definitive monetary determination and directed payment action in the Inspector’s letter would serve to generate no duty of compliance by Respondent and provides no basis for supporting a finding of any violation of A.R.S. §32-1154A(23) or even for having included this charge in the Citation. This charged violation should appropriately be dismissed with prejudice.

10. The testimony of Complainant at the hearing generated a realistic concern with respect to the propriety of prior, and evidently ongoing, business policy actions involving the use of the Registrar’s administrative disciplinary process. Complainant admittedly has been declining to perform remedial measures following communicated complaints about the work performed, until after and only if the Registrar’s Inspector examines and evaluates the work and issues a directive requiring corrective action. Complainant has even frequently encouraged the filing of a formal complaints against his company by either the homeowner or general pool builder by way of implementing this policy, perhaps explaining the unusually high quantity of complaints filed in the past

few years. (Complainant admitted to having 15 to 20 complaints per year filed against him, and the license records of the Registrar reflect the significantly higher total of over 80 complaints filed against his company over a period of slightly more than the past two years, and such records also indicate that Complainant has filed a total of 9 separate non-payment complaints against other contractors).

11. The above-described use of the Registrar’s office by Complainant to superintend and monitor the quality of the work performed or its results is not a proper course of usage of the administrative agency by any licensee. Nor is it appropriate for Complainant, while awaiting Inspectors’ workmanship determinations, to attempt to utilize the Registrar as a collection agency by filing of non-payment complaints against general pool builders, such as Respondent, thereby creating an adverse impact on their record as a contractor. It is wholly incongruous and patently unfair for Complainant to follow an unhurried business policy as to delayed performance of corrective work that deprives or at least postpones the use and enjoyment by a pool owner/customer of the aesthetic benefits of his construction contract while at the same time demonstrating a desire to promptly and without delay receive payment for the work performed by the filing of non-payment complaints. The Registrar should admonish Complainant to discontinue or, at the minimum, substantially modify these business policies.

12. The duties of a general pool contractor, such as Respondent, are not properly discharged merely by making demands or filing complaints against any of its subcontractors who fail or refuse to promptly correct workmanship deficiencies within a reasonable time after notice. The ultimate consumer is entitled to have necessary corrections accomplished without undue delay, and the general pool contractor will be not only justified but also obligated to cause remedial measures to be performed by another specialty subcontractor or, if not beyond the scope of its license, by its own employees. The Dorf pool project serves as an example of an appropriate course of action by Respondent, and the contracting law responsibilities of the uncooperative subcontractor are converted from a duty to rectify deficient work into a duty to reimburse or credit Respondent with the reasonable cost of having accomplished needed corrections through other sources.

CONCLUSIONS OF LAW

1. The demonstrated existence of a bona fide monetary dispute between the parties generates an inability for Complainant to adequately prove that Respondent either had failed to pay a liquidated amount of money when due or had committed any wrongful act to the financial detriment of Complainant, and consequently, the evidence of record does not support any conclusion that Respondent has violated any of the provisions of A.R.S. §32- 1154(A), as charged hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended. that the Registrar of Contractors enter his Order dismissing the charged violation by Respondent of A.R.S. §32-1154A(23) with prejudice and dismissing the balance of the charges and allegations contained, respectively, in the Citation and Complaint in Case Number 98-1537 without prejudice to the rights of the named parties to assert and pursue their respective claims, counterclaims, defenses and set-offs in another, more appropriate forum.

It is further recommended that the Registrar, as part of his approval and adoption of this recommended Order, formally admonish Complainant, Mike’s Construction, to cease and desist from continuing to implement its policy of excessively utilizing the administrative complaint process as a quality control inspection feature and as a collection agency alternative, especially on projects involving intentionally delayed performance of corrective work pending jobsite visits and opinions from Inspectors assigned by the Registrar.

Dated: June 1, 1998. 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: Joyce Armijo -----------------------

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