ALJDEC

98F-1925-ROC · Registrar of Contractors · 1998-08-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 4, 1998. APPEARANCES: Complainant appeared through its authorized employee and qualifying party, Craig Cusick. Respondent was represented by its attorney, Roger Decker. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________

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. Complainant had been Respondent’s primary subcontractor for plastering and natural stone work on swimming pools for approximately two and ½ years to three years until Complainant decided to cease doing business in Arizona. 2. In late November of 1997, Complainant attempted to notify Respondent by telephone that it was ceasing to do business in Arizona. Despite some apparent attempts by Complainant to leave telephone messages with Respondent to give such notice, there is no evidence of record that Complainant ever gave Respondent any written notice that it was ceasing to conduct business in Arizona. 3. On or about December 10, 1997, the parties were discussing Complainant’s decision to cease doing business in Arizona. Complainant’s decision to cease doing business affected not only warranty work for which it was responsible to Respondent but also some scheduled non-warranty projects. 4. As of December 10, 1997, Respondent had always paid Complainant in a timely manner for work performed for Respondent. 5. Complainant warranted the plastering and natural stone work it performed for Respondent for a period of one year under contract; for a period of two years for work subject to the jurisdiction of the Registrar of Contractors; and an optional extended warranty covering a period five years for plaster and ten years for natural stone for which Respondent paid an additional premium price to Complainant. Respondent had entered into a separate agreement with Complainant for the premium-paid warranties as a benefit to its customers. 6. Complainant advised Respondent that it had made arrangements with Superior Plastering to perform its warranty work after it ceased doing business in Arizona. Complainant advised Respondent to forward all warranty work requests to it in California. Complainant would then review the request and authorize Superior Plastering to perform approved warranty work. 7. In December of 1997, Superior Plastering performed a number of warranty repairs on behalf of Complainant as requested by Respondent. However, as a result of Complainant not paying it for those warranty repairs, Superior Plastering advised Respondent that it would not perform any additional warranty work for Complainant on Respondent’s projects unless Respondent paid Superior Plastering directly for those warranty repairs. 8. On or about December 26, 1997, Respondent tendered to Complainant a check in the amount of $14,515.24 covering a portion of the outstanding balance owned to Complainant for work performed on behalf of Respondent. Respondent elected to retain the remaining sum of approximately $20,471.20 to fund warranty work attributable to Complainant’s workmanship if Complainant failed to fulfill its warranty obligations. 9. Complainant refused to perform any subsequent warranty work for Respondent until the retention funds were paid directly to Complainant. 10. Respondent was reluctant to disperse the retention funds to Complainant due to Complainant no longer conducting business in Arizona, the fact that Complainant’s principals and qualifying party were now located in California, the failure of Complainant to pay Superior Plastering for the warranty work in December of 1997, and the outstanding warranty exposure on jobs performed by Complainant as Respondent’s subcontractor. 11. Respondent offered to tender the retained funds to Complainant if Complainant would agree to deposit those funds in an escrow account identified for funding warranty work on projects performed by Complainant as Respondent’s subcontractor. Complainant refused to agree to that proposal. 12. Respondent has sent numerous written requests for warranty work to Complainant but Complainant has failed to undertake proper warranty repair work. 13. As a result of Complainant’s failure to undertake warranty work requested by Respondent, Respondent hired other subcontractors to timely complete the warranty work. Respondent has paid those subcontractors from the retention fund it maintained to cover expenses incurred as a result of Complainant’s failure to perform warranty work. 14. There is credible evidence of record to support the finding that not only has Respondent depleted the retention fund as a result of paying subsequent contractors to perform warranty work which Complainant has refused to perform, but the Respondent has also expended additional funds to pay for warranty work attributable to Complainant’s workmanship. 15. Complainant has failed to sustain its burden of proving that Respondent wrongfully withheld the disputed amount of money for retention to cover warranty work attributable to Complainant’s workmanship. 16. Under all the circumstances, it is determined that it was reasonable for Respondent to retain funds owed to Complainant for the specific purpose of funding warranty work which Complainant refused to perform unless first paid in full. 17. There is no evidence of record that the Registrar of Contractors issued any written directive to Respondent in this matter, or that Respondent failed to comply with any directive from the Registrar.

CONCLUSIONS OF LAW

1. The evidence of record is insufficient to establish that Respondent has violated the provisions of A.R.S. §32-1154 (A) (7), (11) or (23). 2. The totality of the evidence of record supports a dismissal of the citation and complaint in this matter.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the citation and complaint in this matter be dismissed.

Done this day, August 10, 1998.

_________________________________ BRIAN BRENDAN TULLY Administrative Law Judge

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

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

ATTN: Joyce Armijo

By _______________________________

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