ALJDEC

99F-M0228-ROC · Registrar of Contractors · 1999-08-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 3, 1999 at 9:00 a.m. APPEARANCES: Complainant appeared through its owner and qualifying party, Charles R. Baird; Respondent did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

Based upon the entire record in the matter, the undersigned makes the following Findings of Fact, Conclusions of Law and Recommended Order with respect to Complainant’s complaint against Respondent for nonpayment of monies due for services that Complainant rendered to Respondent in connection with Respondent’s operations as a contractor. FINDINGS OF FACT The Registrar of Contractors issued License No. 107397, Class C-48 to Respondent, a corporation, on May 23, 1995. On or about July 7, 1997, Respondent filed a petition for reorganization under Chapter 11 of the Federal Bankruptcy Code, which was designated Cause No. 97-08987-PHX-RTB in the United States Bankruptcy Court located in Phoenix. On March 16, 1998, the parties entered into an oral contract under which Complainant agreed to provide the labor to install approximately 880 or 900 square feet of travertine tile in a residence for which Respondent was the flooring contractor in consideration for Respondent’s payment of $6,000.00. Respondent agreed to and did subsequently supply the tile, crack membrane, grout, thinset, and all other materials needed to complete the job. Complainant started laying the tile on the same date that the oral contract was made, March 16, 1998, a Monday. After all the tile had been laid, when the grouting was approximately 50% or 60% complete, Complainant noticed a bleeding problem that its sponging of the grout had caused to appear on certain isolated tiles that had been stamped on the bottom. Complainant called the problem to the attention of Respondent, the residence’s owner, and the general contractor. Everyone agreed that the problem appeared to be the responsibility of Arizona Tile, which had supplied the tile. Because the stain only appeared with the sponging and it could not be known which tiles would need to be replaced until grouting was completed, Respondent’s qualifying party Michele M. Monti, the owner, and the general contractor agreed that Complainant should finish installing the tile. About a week after Complainant finished installing the tile, Respondent’s qualifying party called Complainant’s qualifying party, told him that Arizona Tile had supplied 40 or 50 additional tiles, and asked him how much more he would charge for Complainant to replace the stained tiles at the residence. Complainant’s qualifying party told Respondent that, before Complainant would agree to perform additional work, it would need to be paid $6,000.00 due under the parties’ contract for the original installation. Rather than paying Complainant, Respondent elected to hire someone else to remove the approximately 40 tiles that needed to be replaced. Within the next several months, Complainant filed a complaint against Respondent for breach of contract in Maricopa County Superior Court, which was designated Case No. CV98-12283. On or about June 3, 1998, Complainant accepted Respondent’s offer to settle the civil claim for $5,000.00. To date, however, Respondent has paid Complainant nothing. On August 11, 1998, Complainant made a complaint against Respondent to the Registrar for nonpayment. Complainant thereafter requested a hearing and, on January 13, 1999, the Registrar issued a Citation and Complaint against Respondent, charging it with violations of A.R.S. § 32-1154(A)(7) and (11). Respondent answered the Citation and Complaint, denying that any money was owed to Complainant and moving to dismiss the complaint against its license based on the pendency of the civil action and the bankruptcy. On February 26, 1999, the Registrar denied Respondent’s motion to dismiss. On June 1, 1999, the arbitrator issued his decision in Maricopa County Superior Court No. CV98-12283, which awarded Complainant $5,000.00 for Respondent’s breach of the settlement agreement, which he found had merged into Complainant’s original breach-of-contract claim. The arbitrator also granted Complainant its reasonable attorney’s fees incurred in prosecuting the action under A.R.S. § 12-341.01(A), which fees were later determined to be $8,600.00. Respondent filed a timely notice of appeal from the arbitrator’s decision, which appeal was pending on the date of the administrative hearing in this matter. To date, Respondent has not satisfied any portion of the civil judgment. Although the beginning of the July 30, 1999 hearing was delayed twenty minutes to allow Respondent additional travel time, it neither appeared, through one of its officers of another authorized representative, contacted the Office of Administrative Hearings to request a continuance, nor presented any evidence at the hearing to defend against Complainant’s complaint to the Registrar of Contractors for failure to pay the $6,000.00 owed for laying the travertine tile. The Citation and Complaint issued by the Registrar advised Respondent that, if it were found in violation of any contracting law, its prior disciplinary record of final Registrar of Contractors’ orders might be considered in mitigation or aggravation. Accordingly, notice is taken of official records of the Registrar of Contractors, which reveal that, if the Registrar accepts this recommended decision, it will be the only final agency order against Respondent on the Registrar’s current record. Therefore, Respondent’s prior record is deemed to be excellent and, thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case. CONCLUSIONS OF LAW In this administrative proceeding, Complainant bears the burden of proof and must establish statutory violations by a preponderance of the evidence. See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). A preponderance of the evidence is “evidence which is of greater weight or more convincing than 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 at page 1064 (6th ed. 1990). Complainant presented evidence at the hearing sufficient to establish that Respondent violated A.R.S. § 32-1154(A)(7)[1] and (11)[2] in failing to pay $6,000.00 to Complainant for the installation of tile pursuant to the parties’ oral contract. The evidence also established that Respondent is not entitled to any offset because the stains that appeared on the tile were not attributable to any deficiency in Complainant’s workmanship and that, in any event, Respondent instructed Complainant to finish grouting despite the appearance of the stains. The Registrar properly denied Respondent’s motion to dismiss based on the pendency of the civil action because Complainant sued Respondent in superior court to collect the amount owed under the oral contract and, in this action, seeks that penalties be assessed against Respondent’s license for violations of Arizona’s contracting laws. Only the Registrar may penalize a contractor’s license and “[t]he mere commission of a prohibited act is insufficient in and of itself to invalidate [a] license.” Hunter Contracting Co. v. Sanner Contracting Co., 16 Ariz. App. 239, 243, 492 P.2d 735 (1972). Since the superior court arbitrator did not and could not determine whether Respondent’s license should be penalized, the superior court judgment and pending appeal do not bar this administrative complaint. The Registrar properly denied Respondent’s motion to dismiss based on the pendency of Respondent’s Chapter 11 bankruptcy (assuming it is still pending) under the reasoning of the Arizona Supreme Court’s opinion in In the Matter of Wade, 168 Ariz. 412, 423, 814 P.2d 753, 764 (1991) and 11 U.S.C. § 362(b)(4). Under these authorities, the Registrar’s regulatory authority to enforce statutes governing the conduct of licensed contractors like Respondent, including an order to pay restitution as a reasonable condition of continued licensure, is not affected by the automatic stay imposed by 11 U.S.C. § 362(a)(1). RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar of Contractors suspend Respondent’s License No. 107397, Class C-48 on the effective date of his order, thirty-five 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 $6,000.00 as restitution for its contracting law violation,[3] no license suspension shall take place and the Citation and Complaint in Case No. M99-0228 be closed. Done this day, August 3, 1999.

______________________________________ Diane Mihalsky Administrative Law Judge Original transmitted by mail this ____ day of August, 1999, to:

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

By ___________________________

----------------------- [1] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[t]he doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.”

[2] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license “[f]ailure by 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 . . . .”

[3] Respondent of course is entitled to an offset against this amount for any portion paid of the $5,000.00 judgment in Maricopa County Superior Court No. CV98-12283. If the Bankruptcy Code’s prohibition on preferential payments prevents Respondent from paying either the judgment or restitution, as a practical matter the recommended suspension of Respondent’s contracting license is unconditional.

-----------------------

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