ALJDEC decisions subject to certification as final

04F-H0248-ROC · Registrar of Contractors · 2004-12-02

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 19, 2004 APPEARANCES: Complainant : Amy Bennett, Esq. appeared for Jackson L. Theis. Mr. Theis was present and testified on his own behalf. Respondent : Thomas E. Price, Esq. represented Farm and Home Building Systems, Inc. Lou Gillette, Qualifying Party testified for the company. Registrar’s Inspector : William Redmant was present and testified. ADMINISTRATIVE LAW JUDGE: Gary B. Strickland _____________________________________________________________________ A hearing was convened to determine whether Respondent violated State law as has been alleged by Complainant and as cited by the Arizona Registrar of Contractors. Evidence and testimony were presented. Respondent, a presently-revoked contractor, formerly held a Class KB- (Duel/Carports Garages and Storage Sheds) license issued by the Registrar of Contractors. Complainant alleges that Respondent accepted money from Complainant for the construction of a steel building on his property and will not refund the deposit made even though Respondent has not constructed the building. Based upon an examination of the entire record,[1] the following Findings of Fact are made, Conclusions of Law rendered, and DECISION AND RECOMMENDED ORDER issued:

FINDINGS OF FACT 1. Respondent’s license (No. 176848) was initially issued on August 6, 2002. The license was in active status at the time that the parties entered into the agreement that is the subject of this complaint. However, the license has been revoked as of June 8, 2004.[2] 2. Louis (“Lou”) Hughes Gillette is the Qualifying Party identified on the Farm and Home Building Systems, Inc. (hereinafter also, “the contractor” or “Farm and Home”) license. 3. The project at issue involved the construction of a steel garage/utility building at a site identified as 6169 Hwy. 66 in Kingman, Arizona. As such, the acts and omissions alleged in the complaint fall within the requirements of Title 32, Chapter 10, Article 3. 4. Complainant Theis entered into a written agreement (“the Agreement”)[3] with Steel Building Sales, Inc. on or about February 17, 2004 whereby the contractor agreed to construct a steel garage at the chosen location at a cost of $20,651.07. In earnest, Mr. Theis paid a deposit of $10,325.54 toward the contract price.[4] On the Agreement was identified ROC Lic. No.176848. Thereafter, the parties modified the Agreement[5] on or about February 26, 2004 by executing a writing wherein the desired location of the anticipated construction was changed from 6169 Hwy. 66 in Kingman, Arizona to a “Jackson preferred site.”[6] The reason for the modification was that Mr. Theis was then under an impression that the 6169 Hwy. 66 in Kingman, Arizona property had been sold. 5. ROC Lic. No.176848 was issued to Farm and Home Building Systems, Inc. on August 6, 2002. The license was in active status as of February 17, 2004 and February 26, 2004. 6. Farm and Home Building Systems, Inc. and Steel Building Sales, Inc. were situated in the same office structure. Louis (“Lou”) Hughes Gillette, Qualifying Party on the subject license, was Michael Little’s boss (Michael Little being the Steel Building Sales, Inc. Office Manager[7]), according to Mr. Theis (as related to him by Little). Although Steel Building Sales, Inc. is not a licensed contractor, according to records maintained by the Arizona Corporation Commission, Steel Building Sales, Inc.’s secretary and statutory agent is Respondent’s qualifying party and president Louis Hughes Gillette’s wife, Patricia M. Gillette. Further the Corporation Commission lists both Steel Building Sales, Inc.’s and Farm and Home Building Systems, Inc.’s address of record as 4325 Stockton Hill Road. 7. The modification was entered into because Theis thought that he might possibly have the building constructed on his property in South Dakota or, perhaps, in Yuma, Arizona. Thereafter, Theis was informed by Gillette that the company would drop-ship the materials to South Dakota, but would not erect the building at that location; such an effort being cost-prohibitive and impossible since Farm and Home Building Systems, Inc. is not licensed to perform contracting work in South Dakota. 8. It was not until May 2004 that Theis learned that ROC Lic. No.176848 had been issued to Farm and Home Building Systems, Inc., not to Steel Building Sales, Inc. 9. As things developed, the sale of the property situated at 6169 Hwy. 66 in Kingman, Arizona did not go through. 10. On March 25, 2004, Theis wrote to Steel Building Sales, Inc. demanding that the subject building be constructed at the Rapid City, South Dakota site within sixty (60) days of March 25, 2004 and that Steel Building Sales, Inc. return a writing to him within ten (10) days of March 25, 2004 with manifestation of intent to comply with the terms of the demand, or, in the alternative, to return the $10,325.54 deposit. 11. Steel Building Sales, Inc. has not complied with the terms stipulated in the demand letter. 12. Mr. Theis filed a Complaint with the Registrar of Contractors on April 8, 2004 stating disconcertion over Steel Building Sales, Inc./Farm and Home Building Systems, Inc.’s unwillingness to refund the deposit. Following the submission of Respondent’s Answer to the Complaint, Theis requested a hearing. 13. In response to these developments, the Registrar of Contractors issued a CITATION AND COMPLAINT on May 27, 2004 wherein is identified allegation that Farm and Home Building Systems, Inc. had violated A.R.S. § 32-1154(A)(7) in this transaction. The CITATION AND COMPLAINT was amended by an Order issued by Administrative Law Judge Mihalsky on October 8, 2004 to include citation to A.R.S. § 32-1154(A)(15) as a section alleged further to have been violated. 14. Pursuant to a NOTICE OF HEARING issued by the Registrar of Contractors on or about August 17, 2004, the hearing convened on November 19, 2004. At the hearing, Complainant Theis argued (1) that there was no performance on the contract and that, therefore, the deposit should be returned; and (2) Farm and Home Building Systems, Inc. allowed its ROC license to be used by an unlicensed contractor for sales purposes. Respondent defended (1) that Complainant is simply attempting to avoid performance of an enforceable agreement; (2) that Theis misrepresented the reason for his attempt to rescind the contract in that the property was never sold; and (3) that Farm and Home Building Systems, Inc. allowed its license number to be shown on the Steel Building Sales, Inc. business card and letterhead by mistake, a mistake immediately corrected once the matter was called to Gillette’s attention by the ROC Inspector on the case. 15. All agree that there has been no performance on the contract. Respondent asserts that Respondent is ready, willing, and able to perform. However, Respondent may not perform because Respondent’s license has been revoked as of June 8, 2004. Therefore, under all of the circumstances, performance is impossible; Steel Building Sales, Inc./Farm and Home Building Systems, Inc. cannot construct the building at the “Jackson preferred site.”[8] 16. Additionally, it is determined that Theis had a right to rescind the contract once Steel Building Sales, Inc./Farm and Home Building Systems, Inc. failed to manifest an intent to comply with Theis’s March 25, 2004 notice identifying his “preferred site” or to give a legally viable excuse for not complying. By not doing so, the contractor gave notice of an intent to breach. 17. Since there has been no performance, let alone “substantial performance,” on the agreement, as modified, Complainant is entitled to a full restitution of his deposit plus 10% from April 5, 2004, the date of the breach. Respondent has wrongfully withheld the deposited money. 18. It further has been demonstrated that the licensee allowed a non-licensed contractor the use of its license for a time. That use thereof ceased once the violation was brought to Gillette’s attention does not negate the fact that a violation, in fact, occurred. 19. The weight and sufficiency of the evidence preponderates that Respondent Farm and Home Building Systems, Inc. has violated provisions of Arizona contracting laws as alleged in the CITATION AND COMPLAINT. . . . . . . APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors charged Respondent with possible violations of A.R.S. §§ 32-1154(A)(7) and (A)(15). Those statutory sections require that a holder of a license or a person listed on a license not commit the following:

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured. . . .

15. Acting in the capacity of a contractor under any license issued under this chapter in a name other than as set forth upon the license.

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 licensees for violations of A.R.S. § 32-1154. 2. The burden of persuasion generally at an administrative hearing falls to the party asserting a claim, right or entitlement, or an Agency seeking to impose a penalty.[9] Further, the standard of proof is that of the “preponderance of the evidence”.[10] Proof by a preponderance means that the evidence is sufficient to persuade the finder of fact that the proposition is “. . . more likely true than not.”[11] The evidence taken as a whole must convince the decision maker that the party who bears the overall burden of persuasion, in this case the Complainant, is more probably correct on the issue(s) in dispute. 3. Observing these standards, Complainant Theis has carried his burden of demonstration, by a preponderance of the evidence, that Respondent Farm and Home Building Systems, Inc. has violated the cited statutory provisions 4. By a preponderance of all of the evidence, Complainant Theis has established that Respondent contractor violated A.R.S ( 32-1154(A)(7) as charged in the CITATION AND COMPLAINT. Respondent has wrongfully refused to refund Mr. Theis his deposit on a contract for which Respondent has not performed and cannot now perform. Theis was in his right to rescind the contract as of April 5, 2004. By not refunding the deposit, Respondent has substantially injured Mr. Theis. 5. By a preponderance of the evidence, it has been proved that Respondent has violated the provisions of A.R.S. ( 32-1154(A)(15) by allowing an unlicensed entity to use Farm and Home Building Systems, Inc.’s ROC license number for the purpose of soliciting sales, thereby misrepresenting the entity’s contracting status. 6. Given the revoked status of Farm and Home Building Systems, Inc., it would be futile to allow it time within which to comply. Accordingly;

RECOMMENDED ORDER In view of the foregoing, IT IS RECOMMENDED that the Registrar of Contractors enter an Order revoking ROC Lic. No.176848 for violation of A.R.S. §§ 32-1154(A)(7) and (A)(15), as charged in the CITATION AND COMPLAINT;

Done this 2nd day of December 2004.

______________________________________ Gary B. Strickland Administrative Law Judge

Original transmitted by mail this ____ day of ____________ 2004 to:

Israel G. Torres, Director Registrar of Contractors Att’n: Jennifer Brown 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

----------------------- [1] The record consists of those documents found within the Agency’s case file, the contents of which the Administrative Law Judge has accorded Administrative notice, the exhibits offered by the parties, respectively, and the digital record of the proceedings under A.A.C. R2-19-121. Complainant offered 4 exhibits, identified 1 through 4. Respondent offered exhibits, marked A through E. All of the exhibits were received.

[2] See Complainant’s Exhibit 3.

[3] Respondent’s Exhibit A.

[4] Respondent’s Exhibit C.

[5] Respondent’s Exhibit B. [6] Id.

[7] See Exhibit 4.

[8] See Exhibit 1, the contract modification.

[9] See Ariz. Admin. Code R2-19-119 (B).

[10] Culpepper v. Arizona Board of Nursing, 187 Ariz. 431, 930 P.2d 508 (App. 1997); See also Ariz. Admin. Code R2-19-119 (A).

[11] In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. BAP (Ariz.) 1994). See also J. LIVERMORE, R. BARTELS, & A. HAMEROFF, LAW OF EVIDENCE ( 301.1(4th ed. 2000) (One party bears the overall burden of persuasion on each fact material to the party’s claims and defenses. Further, the party with the burden of persuasion on a particular fact is required to satisfy the burden of production of enough qualitative evidence sufficient to support a finding of the existence of the fact, following a reasonable person standard.)

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