ALJDEC

99F-P0185-ROC · Registrar of Contractors · 1999-09-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 4, 1999 (Show Low, Arizona)

APPEARANCES: ABS Plumbing was represented by its owner and Qualifying Party Dean Hudson; R. W. Walpole Contracting Corp. was represented by its President and Qualifying Party Robert W. Walpole.

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

ABS Plumbing (hereinafter “ABS”) brings its action to get further payment from R. W. Walpole Contracting Corp. (hereinafter “Walpole”) for labor and materials that ABS provided as a subcontractor. Walpole filed a cross-complaint asserting that ABS failed to build according to specifications, that ABS failed to pay money or give credit owed to Walpole, and that ABS fraudulently altered checks issued to ABS by Walpole. By Order dated July 19, 1999, this tribunal consolidated the cases for hearing. The parties presented evidence and testimony at the hearing and, based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order that ABS’ complaint (P99-0045) be dismissed without prejudice because it is a bona fide legal dispute between the parties, not a violation of the Registrar of Contractors’ statutes and that Walpole’s cross-complaint (P99- 0185) be dismissed with prejudice because the evidence does not show any violation of the Registrar of Contractors’ statutes. FINDINGS OF FACT General Facts 1. In June 1997, Walpole was the general contractor building the Blue Ridge Junior High School in Lakeside, Arizona. ABS submitted a bid for the interior plumbing work. The plans and specifications on the project called for all waste and vent piping to be cast iron. (Exhibit A.) ABS bid the underground piping as ABS-type (plastic) pipe and the above ground piping as copper pipe. According to some of the evidence, ABS bid the project that way because Dean Hudson (hereinafter Dean Hudson will be referred to as “ABS”) had spoken to a school district official who said that ABS pipe would be acceptable on the job. 2. ABS’ bid was accepted. ABS and Walpole entered into a written Subcontract Agreement that required ABS to do the interior plumbing work according to clearly identified specifications that required cast iron pipe for all waste and vent piping. (Exhibit B.) During construction, however, the architect of the project authorized using plastic pipe underground. Cast iron pipe was still required above ground and ABS installed cast iron pipe above ground. ABS’ No-Pay Complaint 3. While ABS was on the jobsite performing under the written Subcontract Agreement, Walpole and ABS entered into a verbal agreement for ABS to do the exterior sewer and gas lines. (Exhibit C.) The verbal agreement was for ABS to do the work on a “time and material basis,” but the parties do not agree about the price that was set. Walpole has paid ABS an amount that Walpole thinks was the price that they agreed to. Walpole’s Cross-Complaints 4. In its cross-complaint, Walpole contends that ABS committed fraud when it cashed payment checks from Walpole. The returned checks show that ABS marked over some of the notations that Walpole had written in the “Memo” corner of the checks. For example, one check included a notation from Walpole that it was “FULL & FINAL PAYMENT.” ABS marked over “FULL & FINAL” and wrote in “partial.” Walpole argues that ABS “altered and fraudulently cashed” the check. 5. Walpole also claims that ABS owes Walpole a credit because less expensive plastic pipe was installed underground instead of cast iron pipe. The architect for the project wrote a letter to the ROC Inspector stating that there was no harm to the owner from the fact that ABS bid plastic pipe rather than cast iron. Apparently, the architect is satisfied that it all evened out in the end. CONCLUSIONS OF LAW 1. The evidence of record does not sufficiently sustain any conclusions of violations by either Walpole or ABS of the provisions of A.R.S. § 32-1154(A) as charged in the two Citations. ABS’ No-Pay Complaint 2. ABS asserts that Walpole owes further money for the verbal agreement and for the greater cost of the cast iron pipe that was installed above ground. The written Subcontract Agreement and the verbal agreement are hereinafter referred to as “the agreements.” 3. ABS’ complaint quite clearly involves a legal dispute between the parties about Walpole’s obligations under the agreements. ABS has not shown that Walpole took an unreasonable position in withholding further payment. Nothing in ABS’ documentary or testimonial evidence goes against a conclusion that this is a genuine contractual dispute between the parties. This Administrative Law Judge cannot reasonably hold or infer that Walpole’s position in disputing further liability under the agreements is arbitrary, unreasonable, or asserted other than in good faith. 4. The Registrar of Contractors is not the appropriate tribunal in which to seek adjudication of contractual disputes. These are more properly pursued in civil court. Even if Walpole is ultimately determined by a court to be responsible for further payment under either agreement, at this time the facts described above constitute bona fide contractual disputes, not wrongful or fraudulent acts by Walpole that would violate A.R.S. § 32-1154(A)(7). 5. The existence of genuine contractual disputes renders ABS unable to establish that liquidated amounts or sums certain are past due and owed by Walpole, which are essential elements to violations of A.R.S. § 32- 1154(A)(11). 6. A good faith dispute exists between the parties regarding Walpole’s further liability to ABS under both agreements. Thus, there has been an insufficient showing in this proceeding that Walpole owes ABS a sum certain that is past due or that Walpole acted fraudulently or wrongfully. Until ABS’ claimed rights to payment are reduced to judgment by a civil court, no violations by Walpole of any of the charged subsections of A.R.S. § 32-1154(A) are established. 7. Dismissal of ABS’ complaint (P99-0045) must be without prejudice. ABS has the right to pursue available civil remedies for breach of contract. Any failure by Walpole to promptly satisfy a court judgment in favor of ABS would provide a basis for a new complaint against Walpole, which could lead to disciplinary action. Walpole’s Cross-Complaints 8. The evidence does not support a conclusion that ABS violated A.R.S. § 32-1154(A)(2), failure to follow plans and specifications, or 32- 1154(A)(3), failure to meet minimum workmanship standards, because the architect okayed the use of plastic piping underground thereby modifying the plans and specifications. 9. The evidence does not support a conclusion that ABS violated A.R.S. § 32-1154(A)(7), committing a fraudulent act, because ABS’ alteration of the notation on the check does not constitute fraud. ABS did not change the amount of the check or any other part of the check. By writing in “partial,” ABS was clarifying its position that it was still owed money, not trying to deceive Walpole. 10. The evidence does not support a conclusion that ABS violated A.R.S. § 32-1154(A)(11), failure to pay another contractor more than $750.00 that is due and owing, because Walpole did not show that it was entitled to a credit for the difference between the ABS pipe and cast iron pipe. 11. Both the complaint and the cross-complaint should be dismissed; the complaint without prejudice, the cross-complaint with prejudice. RECOMMENDED ORDER Based on the foregoing, it is hereby recommended that the Citation and Complaint against Walpole Construction Corp. in Case No. P99-0045 be dismissed without prejudice. IT IS FURTHER RECOMMENDED that the Citation and Complaint against ABS Plumbing in Case No. P99-0185 (cross-complaint)be dismissed with prejudice.

Done this 20th day of September 1999.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Eric A. Bryant Administrative Law Judge

Original mailed this ___ day of September 1999, to:

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

By ___________________________

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