ALJDEC

99F-2397-ROC · Registrar of Contractors · 1999-10-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 6, 1999. APPEARANCES: COMPLAINANT: Ambrosio Talbo, Jr., president and authorized representative. RESPONDENT: Gene Cleaver, president and authorized representative.

ADMINISTRATIVE LAW JUDGE: Anthony Halas _____________________________________________________________________ At hearing on October 6, 1999, the parties presented evidence and testimony on the issue of whether Respondent failed to pay Complainant monies when due for services rendered in connection with Respondent’s contracting business. Based upon consideration of the entire record, including administrative notice of the documents maintained in the file compiled by the Registrar of Contractors, the undersigned administrative law judge makes the following Findings of Fact, Conclusions of Law, and Recommended Decision: FINDINGS OF FACT 1. Complainant Talbo Plumbing Inc., (Talbo Plumbing) is a licensed Arizona plumbing contractor. Ambrosio Talbo Jr. (Talbo) is president of the corporation and, for purposes of this proceeding, the authorized representative who provided testimony and

offered into evidence Exhibits A, B, and C, which were marked and admitted, without objection. In his testimony, Talbo also referenced certain of the documents in the Registrar’s file. 2. Respondent Daniel Levy Group, Inc., (Daniel Levy Group) is a licensed Arizona general contractor, No. 107266, Class B-01. Gene Cleaver (Cleaver) is president of the corporation and the authorized representative who provided testimony. Cleaver did not offer any exhibits, but did reference various of the file documents. 3. Administrative notice of file documents (“Abbreviated Form of Agreement Between Owner and Contractor”) confirms (consistent with the testimony of Cleaver and not controverted by Talbo) that on June 11, 1998, Gene Cleaver, on behalf of the Daniel Levy Group, entered into an agreement with owner Carl Terry (Terry) to “build-out” a Roly Poly Restaurant to be leased on the premises of the Bank of America Building, in downtown Phoenix, Arizona. 4. The total general contract amount was for $50,757.00, of which $15,000.00 was to be paid on acceptance; $25,000.00 on drywall completion; and $10,757.00 on overall completion. 5. On the basis of that general contract, Cleaver then solicited bids and sub-contracted, again on behalf of the Daniel Levy Group, with the several trades necessary to complete the build-out. 6. One of those subs was Talbo Plumbing, which provided a first proposal dated June 4, 1998, in the amount of $14,600.00. Although the record does not clarify why, that proposal was apparently not accepted. 7. Talbo Plumbing provided a second lump sum proposal dated June 25, 1999, “…to furnish labor and material to install a complete sanitary plumbing system…” Although that proposal lists several dollar amounts, Talbo’s testimony, not disputed by Cleaver, was that the proposal was accepted at the agreed-upon price of $11,650, to which one change order for an extra 50 lb. grease trap at $733.83 was later added, for a total sub- contract price of $12,383.83. 8. Talbo described the particular work to be done under that accepted proposal, and stated that within two to three weeks after the contract was made, or sometime later in July, 1998 (July 20, 1998, according to his complaint), his company had completed approximately 80% of the job, or basically everything except the final trim-work, which could be done only after other trades (such as the drywallers) had completed their as-yet unfinished work. 9. Talbo explained that although not completed, the overall project was then halted, and he described how and when he became aware that the Daniel Levy Group, as the general, was having financial difficulties and had not apparently been paid its contract price by the owner. 10. Talbo stated that on July 20, 1998, he invoiced the Daniel Levy Group on the basis of the work done, which the invoice indicated to be 66%, for a “total completed” amount of $7766.67 (two-thirds of the contract price of $11,650.00), which after a 10% retention deduction of $776.66, resulted in the payable amount of $6990.00. 11. Talbo asserted that no money was paid on that invoice until some months later, when in about April, 1999, during the course of an unsuccessful mediation of this dispute, Cleaver did provide a check for $2000.00 in partial payment (which check was initially returned as “NSF” for insufficient funds, and only was paid by Cleaver’s bank after Talbo Plumbing deposited it a second time). 12. While Talbo conceded an awareness that the project was halted when the owner did not complete payments to the Daniel Levy Group, he asserted that Respondent had nevertheless been specifically paid, at Cleaver’s request, for the work done by Talbo Plumbing. 13. As the basis for that assertion, Talbo referenced correspondence dated February 10, 1999 he had received from Mark Stromgren (Stromgren), the general manager for LASALLE PARTNERS MANAGEMENT SERVICES, INC., (LASALLE MANAGEMENT) the Bank of America Building leasing company to the Roly Poly Restaurant. 14. In essence, Stromgren’s correspondence to Talbo noted that, by lease, LASALLE MANAGEMENT was required to supply $2.50 per rentable square foot for “tenant improvements” due Roly Poly, and that such tenant improvements would normally be paid at the end of the job, but Gene Cleaver had said he needed the money right away, and that his plumbing contractor needed to be paid $6000.00; so, although LASALLE MANAGEMENT had no contract with the Daniel Levy Group, its tenant (Roly Poly) approved the disbursement of the rentable square foot allowance of $6678.00 on July 24, 1998, for payment to Cleaver’s company, thereby fulfilling LASALLE MANAGEMENT’s obligation to its tenant. 15. Talbo assumed that because the disbursement was approved just 4 days after his invoice was issued, and because the amount of the disbursement was so similar to his invoice amount of $6990.00, that the Daniel Levy Group was therefore obligated to pay that amount on its invoice. 16. Talbo’s testimony at hearing clarified calculations he had recently made (and reduced to writing in Exhibit C) subsequent to invoicing the Daniel Levy Group, for the value of the plumbing work his company had completed on the project. As a result, he had revised the amount payable for the work actually completed from $6990.00 as invoiced, to $7197.35, which did not include either the interest he believed should be paid (although the accepted proposal did not provide a term for payment of interest) or the $2000.00 Cleaver had eventually paid in April 1999. 17. Cleaver did not dispute that Talbo Plumbing had completed a substantial majority of the work contracted, or Talbo’s recent revision of the amount payable to $7197.35 (which according to Exhibit C, was premised on a more complete extrapolation of the work done, and the extra grease trap) minus the $2000.00 already paid. 18. Cleaver disputed that interest was due, at least pursuant to the Registrar’s disciplinary authority, and therefore calculated the amount due and payable to Talbo for the work completed to be $5197.35. 19. Cleaver testified that the owner with whom the Daniel Levy Group had executed the general contract had failed to pay monies when due and owing, such that the project had been halted in July, 1998 prior to completion of any drywalling, and never resumed. 20. Cleaver explained that of the total contract price of $50,757.00, he had received, from several sources: $2000.00 from the owner, Carl Terry, on July 8, 1998; $6678.00 from LASALLE MANAGEMENT on August 7, 1998, for the tenant improvement allowance; and $9000.00 from a trustee (Levandowski, of Ashworth & Associates) for the owner’s financial backer; all of which totaled $17,678.00, or about 35% of the total contract price. 21. Cleaver denied receiving any further monies under the general contract, and denied that there was any prospect of the Daniel Levy Group being paid anything over and above the amount already paid, given the apparent loss of the owner’s financial backer. 22. From that amount received of $17,678.00, Cleaver stated that he had reached agreements with all of his other subcontractors and suppliers, to whom he had disbursed those proceeds. 23. Cleaver confirmed his discussion with Stromgren of LASALLE MANAGEMENT, (correcting what he believed to be a typo in Stromgen’s letter of February 10, 1999, in which it was indicated that the tenant (Roly Poly) was not, rather than was, being canceled by the franchisor), asserting that when he met with Stromgren he was seeking funds for payment to all his subs, not just Talbo Plumbing. 24. Cleaver further contended that the similarity in the amount invoiced to his company just a few days earlier by Talbo Plumbing to that amount paid his company by LASALLE MANAGEMENT as the tenant improvement allowance per square foot was mere coincidence, and that there was no promise or obligation made that Talbo Plumbing would be paid the funds received by the Daniel Levy Group for that allowance.

APPLICABLE LAW

A.R.S. § 32-1154.A provides, in pertinent part, as follows: A. The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: . . . . . 7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. . . . . . 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. (Emphasis added).

CONCLUSIONS OF LAW

1. The Registrar of Contractors has jurisdiction over this matter, pursuant to A.R.S. § 32-1101, et seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. To warrant action by the Registrar pursuant to the statutes above, Complainant must demonstrate by a preponderance of the evidence that Respondent violated either or both of the statutory sections cited. Culpepper v. State of Arizona, 187 Ariz. 431, 437-38, 930 P.2d 508 (Ariz. App. 1996). A “preponderance of the evidence” means that the evidence is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). It “is evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary, 1182 (rev. 6th ed. 1990). 3. On the evidence presented, there is no doubt, and it is therefore concluded: first, that the Daniel Levy Group performed as required pursuant to its general contract with the owner until the project was halted due to the owner’s failure to pay pursuant to the terms of that contract; second, that the Daniel Levy Group was paid $17,678.00, or 34.83% of the general contract total of $50,757.00, and that nothing further will be paid; third, that Talbo Plumbing performed under its subcontract with the Daniel Levy Group by providing services reasonably valued at $7197.35, and was ready and willing to perform to completion when the overall project was halted; fourth, that the Daniel Levy Group paid $2000.00 to Talbo Plumbing for the services provided by that company, and that $5197.35 remains due and payable for the value of the work completed, exclusive of interest. 4. The undersigned concludes that Gene Cleaver, for Respondent Daniel Levy Group, Inc., is credible in asserting that the company will not receive any further monies pursuant to the general contract under which it entered the subcontract herein with Complainant Talbo Plumbing. 5. However, review of the Registrar’s database relative to the present status of Respondent’s contracting license also lends credence to Cleaver’s further assertion that said license remains in good standing, and is not presently under suspension or other disciplinary penalty, and it is therefore so found and concluded. 6. For that reason, it must be further concluded that Respondent retains the legal capacity - even if cash poor - to pay for the materials or services rendered by Complainant pursuant to subcontract, and the evidence is therefore deemed sufficient by the undersigned to prove a violation of A.R.S. § 32-1154.A.11. 7. This is so, despite the fact that Respondent was not fully paid under the general contract, which fact is deemed to be a mitigating consideration, but not a legal defense to its failure to pay, such that it is determined that the evidence does not demonstrate any fraudulent or wrongful act by Respondent under A.R.S. § 32-1154.A.7.

RECOMMENDED DECISION

In light of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors suspend License No. 107266, Class B-01, held by Respondent Daniel Levy Group, Inc., on the effective date of the Registrar’s Order, thirty-five (35) days after the date of mailing. IT IS FURTHER RECOMMENDED that, if on or before the effective date of the Registrar’s Order, Respondent furnishes written proof to the Registrar that it has paid Complainant Talbo Plumbing, Inc., $5197.35 as restitution for its contracting law violation, no license suspension shall take place and the CITATION AND COMPLAINT in Case No. 99-2397 shall be closed. Done this day, October 26, 1999.

______________________________________ Anthony Halas Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 1999, to:

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

By ___________________________

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826