ALJDEC decisions subject to certification as final

2011A-495-ROC · Registrar of Contractors · 2011-06-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 13, 2011 APPEARANCES: Complainant Neilson Hight appeared on his own behalf. Joyce Johnson-Stovall, Esq. represented Respondent Modern Interiors, L.L.C. ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella _____________________________________________________________________ The question presented by this matter is whether Respondent Modern Interiors, L.L.C. (“Modern”) is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154(A). Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order: FINDINGS OF FACT Modern is the holder of a Class K-61 license (No. 259406) issued by the Registrar of Contractors (“ROC”). Brandon O'Neil is Modern’s qualifying party and a member of Modern. In January 2011, Modern posted an advertisement on Craig’s List for a “40 sq roofing tear off and reinstallation.” See Exhibit C. The advertisement specified that whoever responded must be a licensed contractor, that the materials would be supplied, that two air conditioning units would need to be removed from the house by crane and reinstalled, and that a reply bid should be for labor only and be accompanied by license information. Id. Complainant Neilson Hight responded to Modern’s advertisement. Mr. Hight is not a licensed contractor. However, Mr. Hight advised Mr. O’Neil that he was employed by LRC Development (“LRC”), a licensed general contractor, and that the work would be performed under LRC’s license. LRC’s Class B license number 181516 expired on January 1, 2008. Carl Fredrickson is listed as qualifying party and officer on that license. The ROC issued a Class B license number 270483 to LRC on January 15, 2011. Carl Fredrickson is listed as qualifying party and officer on that license, as well. Mr. Hight met Mr. O’Neil at a Denny’s restaurant on or about January 13, 2011. Mr. O’Neil presented Mr. Hight with a contract that specified that the subcontractor was “Carl Fredrickson of LRC Development.” See Exhibit 1. Mr. O’Neil and Mr. Hight discussed that the timing of the project was critical, and that it was to be completed within two days, to commence on January 17, 2011, with a completion date of January 18, 2011. This specification was also contained in the contract. Id. The contract price was $2,050.00. Id. Mr. Hight took the contract from Mr. O’Neil and advised that he would have Mr. Fredrickson review it prior to signing it. Mr. Hight’s friend, Cynthia Thomas, is a real estate broker and a business associate of Mr. Fredrickson. She reviewed the contract for Mr. Hight. Ms. Thomas made revisions to the contract. Mr. O’Neil rejected those revisions, and Mr. Hight accepted the contract as written by Mr. O’Neil. On January 17, 2011, Mr. Hight began the work on the roof, arriving at the jobsite with a crew of approximately ten men. Mr. Fredrickson also visited the jobsite on that day, having been summoned by Ms. Thomas. Mr. O’Neil was introduced to Mr. Fredrickson, and believed the contractual relationship that existed was between Modern and LRC. Mr. Hight’s crew removed the existing roof and installed two layers of tar paper. However, the installation of the tar paper was defective because Mr. Hight had not removed all of the nails from the roof prior to the installation of the tar paper, and the result was over two thousand holes in the tar paper. Mr. Hight agreed to install another layer of tar paper on the roof. The material was supplied by Modern at a cost to Modern of $500.00. However, Mr. Hight invoiced Modern for the labor to install the additional layer of tar paper in the amount of $1,025.00, notwithstanding the fact that the additional installation was only necessary due to the initial defective installation by Mr. Hight. See Exhibit 3. Mr. Hight worked on the project until its completion, which took approximately three and a half days. On January 20, 2011, Mr. Hight invoiced Modern in the amount of $3,094.28, representing the contract price of $2,050.00, plus $1,025.00 for the installation of the additional layer of tar paper, and $19.28 for staples purchased by Mr. Hight. Id. On January 25, 2011, Mr. Hight filed a complaint against Modern with the ROC alleging non-payment in the amount of $3,094.28. At hearing, Mr. Hight testified that he identified LRC as the subcontractor on the job, and that Mr. O’Neil prepared the contract according to the information supplied by Mr. Hight. Mr. Hight testified that he is an independent contractor for LRC and that he bids jobs for LRC with values in excess of $1,000.00. Mr. Hight testified that he bid the project under LRC’s license and was working under LRC’s license when he performed the instant project for Modern. Mr. Hight testified that after he received the contract from Mr. O’Neil, the Friday before the Monday he was supposed to commence work, he took the contract to Mr. Fredrickson to review and sign. Mr. Hight testified that Mr. Fredrickson made changes to the contract. However, this testimony was contradicted by Ms. Thomas’ testimony, as she testified that she made the revisions to the contract. Mr. Hight testified that he started work on the project on January 17, 2011, beginning with the tear off of the existing roof. After Mr. Hight and his crew installed the double layer of tar paper, Mr. O’Neil conducted an inspection, and was dissatisfied with Mr. Hight’s work. Mr. Hight agreed to install another layer of tar paper. Mr. Hight acknowledged that there were holes in the tar paper. Mr. Hight further acknowledged that “a couple of weeks later” the roof leaked. The following day, the owner of the residence told Mr. Hight that a chandelier had fallen on her Baby Grand piano. Mr. Hight testified that it was not until the last day on the project that he learned that he was not working under LRC’s license because Mr. Fredrickson was not going to sign the contract, and that he was not sure whether Modern or LRC was going to pay him for the work performed. Mr. Hight testified that he expected to be paid by LRC because “normally LRC pays him.” In contrast to Mr. Hight’s testimony, Mr. Fredrickson testified that the “contract was not even close to anything he would consider signing.” Mr. Fredrickson further testified that the revisions to the contract were not made by him. Mr. Fredrickson further testified that he did not utilize Mr. Hight in his business at the time of this project, and that he started to use him as a laborer in April or May 2011. Mr. Fredrickson testified that he has known Mr. Hight through Ms. Thomas for the past three to four years. However, the only work Mr. Hight had performed for Mr. Fredrickson at the time of the instant project, was to install an alarm system in Mr. Fredrickson’s personal residence. Mr. Fredrickson testified that Mr. Hight never worked under LRC’s license or bid jobs for LRC. Mr. Fredrickson testified that Mr. Hight helped him perform the tear off of one roof at the end of April or beginning of May 2011, and that as far as he was aware, the instant project was the first roofing job Mr. Hight had ever performed. Mr. Fredrickson testified that he did not have any conversations with Mr. O’Neil regarding Mr. Hight, that Mr. O’Neil never advised LRC about any damage or any complaints regarding the project, and that LRC did not expect any payment from Modern because LRC did not perform the job and there was no contractual relationship. Mr. Fredrickson testified that the Wednesday after the job was completed, he received a call from Mr. O’Neil. Mr. Fredrickson testified that he told Mr. O’Neil that he (Mr. O’Neil) ran the job, that Mr. Hight and his crew performed the work, and that he should pay them accordingly. Mr. Fredrickson acknowledged visiting the jobsite while the tear off was in process because Ms. Thomas had called him, explaining that Mr. Hight was “having some problems.” Mr. Fredrickson testified that he went to the jobsite as a favor to Ms. Thomas. She had called him the day before expressing excitement that Mr. Hight had secured the roofing job from Modern. Mr. Fredrickson testified that prior to visiting the jobsite, he had not spoken with Mr. Hight and had “no idea what the problems were.” Mr. Fredrickson testified that he spoke with Mr. Hight at the jobsite on the sidewalk for ten to fifteen minutes. Mr. O’Neil testified that Mr. Hight responded to Modern’s advertisement on Craig’s List, stating he was licensed as LRC, that he and Mr. Fredrickson were business partners, and that he had worked with Mr. Fredrickson for seven years. Mr. O’Neil testified that he drafted the contract based on the information provided to him by Mr. Hight and that he had not spoken with Mr. Fredrickson prior to drafting the contract. Mr. O’Neil testified that he had not seen the proposed revisions to the contract until the administrative hearing. Mr. O’Neil testified that Mr. Hight did not have the contract with him on Monday morning, January 17, 2011, when the work commenced. Mr. Hight had advised Mr. O’Neil that he had sent him the proposed revisions to the contract in an email over the weekend. Mr. O’Neil advised Mr. Hight that he had not received the email. Mr. O’Neil testified that he and Mr. Hight discussed the proposed revisions, and Mr. O’Neil advised Mr. Hight that “the contract was the contract” and that he was not open to making revisions. Mr. O’Neil testified that Mr. Hight said, “no problem,” that he would talk to Mr. Fredrickson and that Mr. Fredrickson would bring the signed contract to the jobsite that afternoon. Mr. O’Neil testified that when Mr. Fredrickson arrived at the jobsite, they had a brief introductory conversation, and that afterwards, Mr. Fredrickson spoke with Mr. Hight and left the jobsite. Mr. Fredrickson did not bring the contract to the jobsite. However, Mr. Fredrickson offered to purchase nail guns for Mr. Hight, and later that day, Mr. O’Neil observed the crew utilizing nail guns. Mr. O’Neil testified that he spoke with Mr. Hight later that afternoon and asked for the contract. Mr. O’Neil testified that Mr. Hight told him that Mr. Fredrickson “forgot the contract in his office” and would bring it the following morning. Mr. O’Neil testified that on the second day of the project, Mr. Hight still did not have the contract, and that he observed that the tar paper had been damaged because Mr. Hight and his crew did not remove all the nails from the roof prior to installing the tar paper for the new roof. Mr. O’Neil testified that there were over two thousand holes in the tar paper from nails poking through it. Mr. O’Neil testified that Mr. Hight agreed to install another layer of tar paper. Mr. O’Neil inquired of Mr. Hight about the whereabouts of the contract, and Mr. Hight responded that Mr. Fredrickson would bring it to the jobsite that afternoon. Mr. O’Neil testified that on the third day of the job, he looked up LRC’s license number, and that the license number given by Mr. Hight had expired, but another license number for LRC had been activated a day or so before the job started. Mr. O’Neil testified that when he spoke to Mr. Hight about the expired license status, Mr. Hight gave him the new license number about which Mr. O’Neil was already aware. Mr. O’Neil testified that he called Mr. Fredrickson at the end of the fourth day of the project to advise that the job was complete and the signed contract had not been produced. Mr. O’Neil testified that Mr. Fredrickson stated that he did not know why Mr. O’Neil was calling him, that the contract was not with LRC, and that he should “settle up with [his] guys.” Mr. O’Neil testified that Mr. Hight did not perform the work specified by the contract or that was posted in the advertisement, specifically, the removal of the air conditioning units. Mr. O’Neil testified that Mr. Hight’s crew lifted them in place and slid the felt and shingles in place. Mr. O’Neil further testified that while Mr. Hight and his crew were working on the roof, the homeowner’s chandelier fell onto her Baby Grand piano, causing $420.00 in damage. Mr. O’Neil testified that the additional tar paper for the roof cost $500.00. Mr. O’Neil further testified that the condensation line from one of the air conditioning units leaked through a skylight and that he personally repaired the deficiency. Mr. O’Neil testified that his daily labor rate is $450.00, and that the materials used for the repair cost between $40.00 and $50.00. CONCLUSIONS OF LAW In this proceeding, Mr. Hight bears the burden to prove, by a preponderance of the evidence, that Modern is subject to discipline for violations of A.R.S. § 32-1154(A)(10) and/or (A)(11) as charged by the ROC in its March 18, 2011 Citation and Complaint. See Arizona Administrative Code R2-19-119. 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). The Administrative Law Judge concludes that Mr. Hight met his burden of proof as to one of the ROC’s charges. A.R.S. § 32-1121(A)(14) sets forth the requirements for individuals who are not required to be licensed, in pertinent part as follows: Any person other than a licensed contractor engaging in any work or operation on one undertaking or project by one or more contracts, for which the aggregate contract price, including labor, materials and all other items . . . is less than one thousand dollars. . . . The work or operations which are exempt under this paragraph shall be of a casual or minor nature. This exemption does not apply: . . . .

(b) In any case in which the work or construction is only a part of a larger or major operation, whether undertaken by the same or a different contractor . . . .

Under A.R.S. § 32-1154(A)(10), a contractor is subject to discipline for “aiding or abetting a licensed or unlicensed person to evade this chapter . . .” Modern argues that it did not knowingly aid and abet the unlicensed activities of Mr. Hight because Mr. O’Neil believed that Mr. Hight was working under LRC’s general contracting license, and, therefore, that Modern should not be found to be in violation of the applicable charged section of the State’s Contracting laws. Notwithstanding Modern’s position, it is incumbent upon any licensed contractor that utilizes subcontractors to verify that those subcontractors are, in fact, properly licensed. Although Mr. O’Neil’s lack of knowledge at the time the work was performed that Mr. Fredrickson would not sign the contract may explain Modern’s actions, it does not excuse the fact that Modern effectively aided and abetted an unlicensed contractor. Modern’s assertion that Mr. Hight was working under the “handyman exception” is not plausible given the provisions of A.R.S. § 32-1121(A)(14), as the contract price of $2,050.00 exceeded $1,000.00, rendering the “handyman exception” inapplicable. The Administrative Law Judge concludes that Modern’s use of an unlicensed subcontractor on the project constitutes a violation of A.R.S. § 32- 1154(A)(10). Under A.R.S. § 32-1154(A)(11), a contractor is subject to discipline for the “failure . . . 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 . . .” In this case, Mr. Hight is claiming that he is due $3,094.28. However, $1,025.00 of that amount is attributable to costs incurred as a result of deficient work performed by Mr. Hight and his crew, and the additional cost of the tar paper needed to remedy the deficiency was $500.00. Further, it was uncontested that the homeowner sustained damages in the amount of $420.00 incurred as a result of a chandelier falling on a Baby Grand piano during the course of the work performed by Mr. Hight and his crew. Also, it is uncontested that the roof installed by Mr. Hight and his crew leaked within weeks of its installation. Mr. O’Neil credibly testified that he repaired this deficiency and that the daily rate he charges for his work is $450.00, and that the cost for materials for the repair was between $40.00 and $50.00. Taking these offsets into account, the total amount owed to Mr. Hight would be $659.28, an amount below the $750.00 threshold for finding a violation of A.R.S. § 32-1154(A)(11). Therefore, the Administrative Law Judge concludes that Modern did not violate A.R.S. § 32-1154(A)(11). Based on the foregoing statutory violation, it is appropriate for the ROC to impose discipline against Modern’s Class K-61 license. Upon consideration of all of the facts and circumstances presented by this case, the Administrative Law Judge concludes that the ROC should suspend Modern’s Class K-61 license. RECOMMENDED ORDER Based on the foregoing, the Administrative Law Judge makes the following Recommended Order: On the effective date of the Order entered in this matter, Modern’s Class K-61 license (No. 259406) shall be suspended for a period of three (3) days. It is further recommended, in addition to the foregoing license suspension, that Modern’s Class K-61 license be placed on disciplinary probation for a period of ninety (90) days immediately following the period of suspension. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification. Done this day, June 27, 2011. /s/ Sondra J. Vanella Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors -----------------------

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