Jm Homes v. Empire ( 2015 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
J.M. HOMES, LLC, Plaintiff/Appellant,
v.
EMPIRE I BUILDERS, LLC, Defendant/Appellee.
No. 1 CA-CV 14-0179
FILED 7-28-2015
Appeal from the Superior Court in Coconino County
No. S0300CV201300042
The Honorable Dan R. Slayton, Judge
AFFIRMED
COUNSEL
Law Office of Michael G. Tafoya, PLLC, Maricopa
By Michael G. Tafoya
Counsel for Plaintiff/Appellant
C. Mark Schreiner, Attorney at Law, Flagstaff
By C. Mark Schreiner
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Presiding Judge John C. Gemmill delivered the decision of the Court, in
which Judge Kenton D. Jones and Judge Donn Kessler joined.
JM HOMES v. EMPIRE
Decision of the Court
GEMMILL, Judge:
¶1 J.M. Homes, LLC (“JM Homes”) appeals the superior court’s
order affirming the Arizona Registrar of Contractor’s (“ROC”) decision that
requires JM Homes to pay Empire I Builders, LLC (“Empire”) $12,938.29 for
construction work Empire performed. For the reasons that follow, we
affirm.
BACKGROUND1
¶2 In November 2010, JM Homes, a general contractor,
contracted with Victor McCleve to construct three homes on lots
(“Property”) that, according to the Administrative Law Judge (“ALJ”), were
owned by Victor. Under the construction contracts, JM Homes was not
responsible for “driveways, or sidewalks.” Victor’s son, William McCleve,
is JM Homes’ principal. Victor is not a licensed general contractor, and he
is not officially affiliated with JM Homes.
¶3 JM Homes, in turn, contracted with Empire whereby Empire
agreed to undertake certain construction projects (collectively, “Project”) on
the Property. Robert Corrigan, Empire’s managing member,
communicated solely with Victor during the course of the Project, not with
William McCleve. Victor, not JM Homes, paid Corrigan for some of the
work completed by Empire. Based on county records, Corrigan also did
not “think that . . . Victor McCleve was actually the homeowner of this
property.” Therefore, Corrigan was under the impression Victor “was with
JM Homes” and that Victor “represented JM Homes throughout this
matter[.]”
¶4 Because Empire was paid for some, but not all, of the work it
completed on the Project, Empire filed a ROC complaint against JM Homes
on October 4, 2011 for nonpayment of $12,938.29 in labor and materials. On
1 We view the evidence in a light most favorable to upholding the
ROC’s decision. See Prebula v. Ariz. Dept. of Econ. Sec., 138 Ariz. 26, 30, 672
P.2d 978, 982 (App. 1983). We note that Empire’s exhibits at the
administrative hearing are not in the record on appeal despite JM Homes’
stipulation to provide copies of all exhibits with its opening brief filed in
superior court. We presume those items support the ROC’s decision. See
Baker v. Baker, 183 Ariz. 70, 73, 900 P.2d 764, 767 (App. 1995) (when a party
fails to include entire record on appeal, appellate court assumes the missing
portions would support the trial court’s findings and conclusions).
2
JM HOMES v. EMPIRE
Decision of the Court
February 13, 2012, JM Homes filed a ROC complaint alleging various
workmanship issues related to Empire’s work on the Project. At some point
thereafter, Victor also filed a complaint with the ROC against Empire.2
¶5 Empire’s nonpayment complaint proceeded to an
administrative hearing on March 5, 2012, and the parties agreed to continue
the hearing until JM Homes’ workmanship complaint was resolved. The
ROC closed JM Homes’ complaint after Empire performed specific
corrective work. The ROC dismissed Victor’s complaint on March 14, 2012,
because he did not respond to correspondence from the ROC. On October
22, 2012, an ALJ held the continued hearing on Empire’s nonpayment
complaint.
¶6 Noting the resolution of the workmanship complaints JM
Homes and Victor had filed against Empire, the ALJ stated that the
hearing’s purpose was not to address issues related to Empire’s
workmanship but to resolve Empire’s allegation of nonpayment.
Nonetheless, JM Homes introduced evidence of Empire’s workmanship
and purported untimeliness in completing specific tasks of the Project.
After the hearing concluded, the ALJ issued his decision, and, consistent
with the hearing’s purpose, rejected JM Homes’ arguments that Empire was
not entitled to payment in full because of its poor workmanship on the
Project. The ALJ also found JM Homes responsible for payment of the
invoices at issue because Empire could reasonably assume Victor acted on
behalf of JM Homes. The ALJ recommended suspending JM Homes’
contractor license until JM Homes fully paid Empire.
¶7 The ROC adopted the ALJ’s recommended order in all
material respects. JM Homes sought judicial review in superior court, and
the court affirmed the ROC’s decision. JM Homes appealed. We have
jurisdiction under Arizona Revised Statutes (“A.R.S.”) section 12-913.
DISCUSSION
¶8 Although set forth as five distinct issues, JM Homes
essentially challenges two aspects of the ROC’s decision. First, JM Homes
contends the ALJ should have considered issues related to Empire’s
workmanship on the Project in determining whether JM Homes is obligated
to pay Empire in full. Second, JM Homes argues the ROC erred in
2 The record copy of Victor’s complaint is mostly illegible, but it
appears to relate to Empire’s work on two concrete driveways.
3
JM HOMES v. EMPIRE
Decision of the Court
concluding JM Homes is required to pay Empire for driveway and sidewalk
work that was specifically excluded in the construction contracts between
JM Homes and Victor.
I. Standard of Review
¶9 In reviewing an administrative agency’s decision, the
superior court “shall affirm the agency action unless after reviewing the
administrative record and supplementing evidence presented at the
evidentiary hearing the court concludes that the action is not supported by
substantial evidence, is contrary to law, is arbitrary and capricious or is an
abuse of discretion.” A.R.S. § 12-910(E). Arbitrary and capricious agency
action has been described as “unreason[ed] action, without consideration
and in disregard for facts and circumstances[].” Petras v. Ariz. State Liquor
Bd., 129 Ariz. 449, 452, 631 P.2d 1107, 1110 (App. 1981), quoting Tucson Pub.
Sch., Dist. No. 1 of Pima Cnty. v. Green, 17 Ariz. App. 91, 94, 495 P.2d 861, 864
(App. 1972). The superior court must defer to the agency’s factual findings
and affirm them if supported by substantial evidence. Sanders v. Novick, 151
Ariz. 606, 608, 729 P.2d 960, 962 (App. 1986). If an agency’s decision is
supported by the record, substantial evidence exists to support the decision
even if the record also supports a different conclusion. DeGroot v. Ariz.
Racing Comm’n, 141 Ariz. 331, 336, 686 P.2d 1301, 1306 (App. 1984).
¶10 We engage in the same process as the superior court when we
review its ruling affirming an administrative decision. Webb v. Ariz. Bd. of
Med. Exam’rs, 202 Ariz. 555, 557, ¶ 7, 48 P.3d 505, 507 (App. 2002). Thus, we
reach the underlying issue of whether the administrative action constituted
reversible error. See Havasu Heights Ranch & Dev. Corp. v. Desert Valley Wood
Prods., Inc., 167 Ariz. 383, 386, 807 P.2d 1119, 1122 (App. 1990).
¶11 Whether substantial evidence exists is a question of law for
our independent determination. See Pinal Vista Prop., LLC v. Turnbull, 208
Ariz. 188, 189–90, ¶ 6, 91 P.3d 1031, 1032–33 (App. 2004); Havasu Heights
Ranch, 167 Ariz. at 387, 807 P.2d at 1123. However, we view the evidence
in the light most favorable to upholding an administrative decision. Special
Fund Div. v. Indus. Comm’n of Ariz., 182 Ariz. 341, 346, 897 P.2d 643, 648
(App. 1994). We are not bound by an agency’s or the superior court’s legal
conclusions. Sanders, 151 Ariz. at 608, 729 P.2d at 962.
II. Workmanship Issues
¶12 Arizona law provides, in relevant part:
4
JM HOMES v. EMPIRE
Decision of the Court
A. The holder of a [contractor] license . . . shall not commit
any of the following acts or omissions:
...
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 . . . .
A.R.S. § 32-1154(A)(11) (emphasis added).3
¶13 Relying on the emphasized language in § 32-1154, JM Homes
argues the ROC erred in not considering the workmanship issues related to
Empire’s work on the Project. We disagree.
¶14 “Waiver is either the express, voluntary, intentional
relinquishment of a known right or such conduct as warrants an inference
of such an intentional relinquishment. Waiver by conduct must be
established by evidence of acts inconsistent with an intent to assert the
right.” Am. Cont’l Life Ins. Co. v. Ranier Const. Co., 125 Ariz. 53, 55, 607 P.2d
372, 374 (1980) (citations omitted).
¶15 JM Homes waived its right to raise workmanship issues at the
continued hearing on Empire’s nonpayment complaint. At the March 5,
2012 hearing, the ALJ informed the parties that he would only consider
workmanship issues at the continued hearing if JM Homes’ open
workmanship complaint against Empire was not resolved and closed.
Indeed, the ALJ instructed that, should either party request a hearing on the
workmanship complaint, the request should indicate the pending
nonpayment hearing to ensure the same ALJ would be assigned the
workmanship case, and the matters would, therefore, be consolidated and
considered together.
¶16 As noted, JM Homes’ workmanship complaint led to Empire
performing the necessary corrective work, and the complaint was closed.
JM Homes was apparently satisfied with that resolution because it did not
request a hearing. Additionally, although Victor filed a complaint
regarding Empire’s work on two driveways, Victor did not pursue the
matter further, and his complaint was closed. On this record, we conclude
JM Homes voluntarily forfeited its opportunity to defend the nonpayment
3 The statute was renumbered in 2014. See 2014 Ariz. Sess. Laws, ch.
185, § 2 (2nd Reg. Sess.).
5
JM HOMES v. EMPIRE
Decision of the Court
complaint on the basis of Empire’s workmanship. Accordingly, the ROC
did not err in refusing to consider Empire’s workmanship.
III. Payment for Concrete Work
¶17 JM Homes argues the ROC erred in concluding Victor was JM
Homes’ agent, and, because Empire contracted with Victor to construct
driveways, JM Homes is not required to pay Empire for that work.
Alternatively, JM Homes contends it was entitled to a credit equal to the
value of the construction materials Victor gave Empire to perform the
driveway work.4
¶18 This court has described apparent agency as follows:
An apparent or ostensible agent is one where the principal has
intentionally or inadvertently induced third persons to
believe that such a person was his agent although no actual or
express authority was conferred on him as agent. Apparent
or ostensible authority may be defined as that authority
which the principal knowingly or negligently holds his agent
out as possessing, or permits him to assume, under such
circumstances as to estop the principal from denying its
existence. Apparent authority can never be derived from the
acts of the agent alone. Instead, when dealing with apparent
authority, the emphasis shifts to the third party’s reliance on
the acts of the alleged principal and the agent as opposed to
any express or implied grant by the principal.
Reed v. Gershweir, 160 Ariz. 203, 205, 772 P.2d 26, 28 (App. 1989)
(internal citations omitted).
¶19 The ROC determined that Victor was JM Homes’ apparent
agent and the record supports that conclusion. First, Victor McCleve is
William McCleve’s father. After Empire entered into the verbal contract
with Victor, Corrigan searched the county recorder’s records to determine
who owned the Property. Based on that, Corrigan logically understood that
JM Homes owned the Property and that Victor was entering into contracts
on behalf of JM Homes as a representative. Second, Corrigan then sent
invoices for payment to JM Homes for work completed on the driveways.
4 Victor testified that he provided the materials needed for the
driveway work and that he gave Empire other “left over” building
materials as payment for the work.
6
JM HOMES v. EMPIRE
Decision of the Court
Victor made those payments and JM Homes assented to the payments
Victor made to Empire for some of the work Empire completed. Indeed,
JM Homes admitted at the hearing that Victor was “self-financing all the
construction,” and Corrigan stated that Empire credited JM Homes with
those payments. This evidence supports a conclusion that JM Homes at
least inadvertently induced Empire to believe Victor was its agent. Empire
was justified in assuming Victor was JM Homes’ agent because it was Victor
who paid Empire and with whom Corrigan communicated regarding the
Project’s details.
¶20 As JM Homes’ agent, Victor’s agreement with Empire to
construct the driveways and sidewalk obligated JM Homes to pay for that
work. The record reveals no evidence that Corrigan and Empire were
aware that JM Homes and Victor agreed JM Homes would not be
responsible for driveway or sidewalk construction. See Queiroz v. Harvey,
220 Ariz. 273, 275, ¶ 10, 205 P.3d 1120, 1122 (2009) (noting “the rule that the
principal is bound by his agent’s conduct is consistent with long-
established principles of equity”).
¶21 We also reject JM Homes’ argument that it is entitled to a
credit for the payment Victor made to Empire in connection with the
driveway work. Although Victor testified that he paid Empire by giving
Corrigan left over building materials, no evidence establishes the value of
those materials. The applicable invoice and Corrigan’s testimony, however,
reflect that the driveway work had not been paid. Although the hearing
evidence is conflicting, sufficient evidence supports the conclusion that JM
Homes is not entitled to a credit. See DeGroot, 141 Ariz. at 336, 686 P.2d at
1306.
IV. Attorney Fees
¶22 Empire requests its attorney fees incurred on appeal pursuant
to A.R.S. § 12-341.01. We deny Empire’s request. This case involved an
administrative disciplinary proceeding and, therefore, did not arise out of
contract. See Keystone Floor & More, LLC v. Ariz. Registrar of Contractors, 223
Ariz. 27, 28, ¶ 1, 219 P.3d 237, 238 (App. 2009), as amended (July 15, 2009)
(holding that ROC disciplinary action against contractor did not arise out
of contract under A.R.S. § 12-341.01).
¶23 Empire also requests its fees under A.R.S. § 12-349. That
statute provides in pertinent part:
[T]he court shall assess reasonable attorney fees, expenses
and, at the court’s discretion, double damages of not to exceed
7
JM HOMES v. EMPIRE
Decision of the Court
five thousand dollars . . . if the attorney or party does any of
the following:
1. Brings or defends a claim without substantial justification.
2. Brings or defends a claim solely or primarily for delay or
harassment.
3. Unreasonably expands or delays the proceeding.
4. Engages in abuse of discovery.
A.R.S. 12-349(A). The record does not support an award of fees to Empire
under § 12-349, and we deny its request.
CONCLUSION
¶24 This court agrees with the superior court that the ROC’s
decision is supported by substantial evidence, is not contrary to law, and is
not arbitrary and capricious. The ROC acted within its discretion by
directing JM Homes to pay Empire in full. Accordingly, we affirm.
:ama
8