ALJDEC decisions subject to certification as final

2013A-5868-ROC · Registrar of Contractors · 2016-07-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

APPEARANCES: Mark Morris on his own behalf; Tony Gonzales, Esq. for Respondent ADMINISTRATIVE LAW JUDGE: Thomas Shedden _____________________________________________________________________ This matter relates to a house that Complainant Mark Morris and his wife Carrie, contracted to have built on Luminary Way in Lakeside Arizona. The issue for hearing is whether Respondent Veteran Group, Inc. violated Ariz. Rev. Stat. section 32-1154(A)(3). Pending is Veteran Group’s Motion to Dismiss. The gravamen of that Motion is that collateral estoppel bars Mr. Morris from “relitigating the issue of ‘who was the general contractor’” of the Morris’s house. Veteran Group asserts that after a hearing in another matter, the Registrar of Contractors (“ROC”) determined that Eric Cederquist, who was not licensed, was the contractor at the Morris’s house, and that during that hearing, Mr. Morris testified that he had hired Mr. Cederquist, not Veteran Group. Background Information On December 13, 2013, Mr. Morris filed with ROC a complaint against Veteran Group. With his complaint, Mr. Morris included a list of twenty- seven alleged workmanship or other deficiencies. Mr. Morris’s requested resolution was for Veteran Group to finish the house, make the required repairs, and to return money he was due. On December 20, 2013, Mr. Morris filed with ROC a second complaint about the house, this one against Mr. Cederquist. That complaint included the same list of twenty-seven issues, and it included additional allegations about Mr. Cederquist to the effect that he was contracting without a license, he had overcharged the Morrises, project funds were mismanaged, illegal payments were made, substandard work was completed, unqualified people did work, he did not finish the project, and the Morrises finally had to bar him from the property. ROC consolidated Mr. Morris’s complaint against Mr. Cederquist with other matters in which Mr. Cederquist or his wife were also charged with unlicensed contracting. The matter related to Mr. Morris’s complaint against Mr. Cederquist was designated as Docket No. 2014A-1158-ROC. Administrative Law Judge Diane Mihalsky conducted a hearing of the consolidated matters in July and October 2014. ROC was the complainant in the consolidated matters. On October 27, 2014, ALJ Mihalsky issued an Administrative Law Judge Decision. In an Order dated November 17, 2014, ROC adopted that Decision in full. Excerpts from the Administrative Law Judge Decision in Docket No. 2014A- 1158-ROC Findings of Fact 4. Mr. [Keith] Robinson is an officer and the owner of Veteran Group Corporation, License No. B.274004-R for residential general construction (“Veteran Group”), the purported licensed contractor on the Morris project.

41. On or about July 14, 2012, Mr. and Mrs. Morris as “Owner,” Mr. Cederquist as “Project Manager,” and Russell Wilson as purported vice president of on behalf of Veteran Group as the “Contractor” signed that Residential Construction Contract that Mr. Cederquist had drafted (“the Morris contract”).[Footnote omitted.]

44. Mr. Robinson testified that at that time of the Morris contract, Mr. Wilson was an employee and qualifying party for Veteran Group. Mr. Robinson testified that Mr. Wilson was not Veteran Group’s vice president and was not authorized to sign contracts on its behalf. Mr. Robinson testified that Veteran Group uses a form contract that was different from the Morris contract and that he did not know anything about the Morris contract until he became involved in the Registrar’s investigation of Mr. Cederquist’s possibly unlicensed contracting activity in the construction of the Morris residence.

45. On August 26, 2012, Mr. Robinson on Veteran Group’s behalf completed and signed a Contractor Questionnaire and Certificate of Liability Insurance and filed the documents with BBVA Compass Bank to allow Mr. and Mrs. Morris to obtain financing for the construction of their residence. Mr. Robinson testified that he received $3,600.00 for completing and filing the paperwork.

46. Mr. Robinson testified that he initially intended to build the Morris residence because Mr. Wilson suggested that Veteran Group could profit by building houses in the mountains. Mr. Robinson testified that the Morris project dragged on and that eventually, Mr. Cederquist informed him that he would build the house with Mr. Morris as an owner-builder.

47. Mr. Robinson testified that in the initial discussions, he understood that Veteran Group would receive $4,000.00 for profit and overhead for acting as contractor in this construction of the Morris residence, but that Veteran Group never received any more payments after the initial $3,600.00 for completing the Contractor Questionnaire and Certificate of Liability Insurance.

48. Mr. Robinson testified that when he learned that Mr. Wilson was being paid to work on the Morris residence, he removed him from Veteran Group’s payroll and eventually disassociated Mr. Wilson as Veteran Group’s qualifying party. According to the Registrar’s public website, on March 28, 2014, the Registrar suspended Veteran Group’s residential general contracting license for lack of a qualifying party.

49. Mr. Robinson testified that Mr. Wilson was not on Veteran Group’s payroll during the construction of the Morris residence and that Veteran Group did not provide any materials, equipment, or labor and did not hire any subcontractors for the construction of the Morris residence. Mr. Robinson testified that he did not even know that a permit had been pulled for the Morris residence, but that he later learned that Mr. Cederquist had pulled the permit in Veteran Group’s name. Mr. Robinson testified that Veteran Group did not even build the roof of the Morris residence, even though its main line of work is roofing.

52. Mr. Morris testified that he did not contract with Veteran Group for construction of his residence and that he did not meet Mr. Robinson until 2013, after he had a falling out with Mr. Cederquist. [Underscore added.]

57. Mr. Morris testified he was not acting as an owner-builder because he had hired Mr. Cederquist to build the residence. Mr. Morris testified that Mr. Cederquist was not his employee. Mr. Morris testified that he did not sign any checks or withhold any sums for taxes or insurance.

60. The Registrar submitted numerous documents that were issued under Veteran Group’s name for the Morris project, including the following: 60.1. Invoice # 105-6 for $2,248.55 dated October 13, 2013 for the final billing, with the notation, “Make all checks payable to Eric Cederquist,” and an attachment consisting of a document entitled Financial Review that showed a total of $157,994.25 had been paid on the project; 60.2. A General Ledger for the period from July 1, 2012, to January 31, 2013, that showed numerous credits and debits, including checks paid to Mr. Cederquist and Ms. O’Connor; and 60.3. A Construction Permit Application to the Navajo County Building Department that was signed by Mr. Cederquist on July 25, 2012. 61. Mr. Robinson testified that Veterans Group had not issued any of the documents that showed its name.

65. Investigator Shikany testified that at some point, Mr. Cederquist had a falling out with Mr. and Mrs. Morris. On October 16, 2013, Mr. Wilson sent an email to Mr. Morris, informing him as follows: You hired [Mr. Cederquist] as your general contractor and he is responsible for the hiring/coordinating of all subcontractors, purchasing materials, and handling all money matters. I was hired by [Mr. Cederquist] as a subcontractor to build the house and was paid by him. I have had nothing to do with any matters pertaining to the handling of any money. . . .[Footnote omitted.] Conclusions of Law 4. Despite the terms of the Morris contract, Veteran Group did not perform any work, hire any subcontractors, purchase any materials, receive any progress payments, pay any taxes or workers’ compensation insurance premiums, or exercise any oversight over the construction of the Morris residence. In addition to Mr. Morris’s credible testimony that he did not act as owner-builder, it does not appear that Mr. and Mrs. Morris hired or paid any subcontractors or exercised any oversight or control over the overall project or over Mr. Cederquist’s contracting activities.

6. The Registrar established that Mr. Cederquist undertook to and actually did act as general contractor in the construction the Morris residence for compensation by hiring and paying subcontractors and suppliers and performing work himself. Therefore, the Registrar established that Mr. Cederquist committed unlicensed contracting in violation of A.R.S. § 32-1151.

7. With respect to the appropriate civil penalty, the factors listed in A.A.C. R4-9-131 are not exhaustive. Mr. Cederquist as a former licensed contractor knew about the requirement of a license to perform most construction work. It appears that Mr. Cederquist carefully drafted the terms of his form contract to skirt the law. When Veteran Group did not provide the screen that Mr. Cederquist planned, he created documents, including the permit application and Unconditional Final Lien Waivers, to give the false impression that Veteran Group had been involved in the project to cover his own unlicensed contracting activity. … [Underscore added.]

Mr. Morris’s Opposition to Respondent’s Motion to Dismiss Mr. Morris argues that collateral estoppel does not apply because the issue in this matter is not the same as the issue in Docket No. 2014A-1158- ROC and because he was not a party to that matter. Mr. Morris argues that the first matter was solely to determine if Mr. Cederquist committed unlicensed contracting in violation of Ariz. Rev. Stat. section 32-1151, that workmanship was not at issue in that matter, and that who is the general contractor is not at issue in either matter. Mr. Morris asserts that this matter is a case about license renting (i.e., that Veteran Group rented its license), that Veteran Group entered a contract with the Morrises in which it agreed to provide supervision on the project, and that it accepted from the Morrises money for that supervision but failed to provide any.[1] As such, according to Mr. Morris, the primary issue in this matter is the extent of Veteran Group’s liability for shoddy workmanship that it was under contract to supervise. Mr. Morris also argues that although Mr. Cederquist may have been the de facto contractor, under the law, Veteran Group still had obligations under the contract as our licensed contractor. Mr. Morris asserts that he is entitled to a trial to determine those obligations and the extent of damages that the Morrises suffered as a result of Veteran Group’s neglect of its obligations. According to Mr. Morris, it cannot be that a licensed contractor can rent its license, bury its head in the sand will earning that rent, and then be immune from responsibility for any bad work: if that were the case, then a homeowner would have has no recourse. Veteran Group’s Reply to Complainant’s Response in Opposition Veteran Group reiterates is positon that the issue is who is the general contractor. It argues that the Decision in Docket No. 2014A-1158- ROC precludes Mr. Morris from raising that same issue in this matter because a finding that Veteran Group was the contactor would require invalidating that Decision. Veteran Group argues that even if collateral estoppel does not apply, Mr. Morris cannot win because Veteran Group was not the contractor. In the first hearing, Mr. Morris testified that he filed his complaint against Mr. Cederquist because Mr. Cederquist repeatedly told Mr. Morris that he was the builder, and of course Mr. Morris would file a complaint against his builder. Veteran Group argues that Mr. Morris’s reliance on the contract is misplaced because that contract was not valid as to Veteran Group because Mr. Wilson had no authority to sign. Veteran Group also argues to the effect that there was no performance under that contract because Mr. Morris did not pay Veteran Group as he was obligated to do under the plain terms of the contract and Veteran Group did not do any work at the house.[2] Veteran Group also argues that Mr. Morris has taken inconsistent positions by arguing that Veteran Group was a party to the construction contract and alternatively that Veteran Group entered a contract to supervise construction. Analysis and Conclusion The Administrative Law Judge Decision in Docket. No. 2014A-1158-ROC, as accepted by ROC, precludes a finding that Veteran Group violated Ariz. Rev. Stat. section 32-1154(A)(3). That Decision shows that Veteran Group was not the contractor and that it performed no construction work at the Morris’s house. Moreover, those conclusions were based on Mr. Morris’s testimony about who he contracted with, who performed the construction work, and who he paid. Arguably, Mr. Morris has taken two positions regarding any contractual relationship between the Morrises and Veteran Group: (1) that Veteran Group was a party to the construction contract; and (2) that Veteran Group was under contract to supervise the construction of the house. The Decision in Docket. No. 2014A-1158-ROC shows that Veteran Group was not a party to the construction contract. And although Mr. Robinson acknowledged that Veteran Group had initially agreed to supervise construction, the Decision shows that that agreement never came to fruition because Mr. Cederquist told Mr. Robinson that Mr. Morris was going to act as an owner/builder. Although Mr. Morris asserts that Veteran Group rented its license, that allegation was not directly considered in Docket. No. 2014A-1158-ROC and it is not at issue in this matter. Assuming that Mr. Morris is correct however, ROC would have authority to discipline Veteran Group for that offense.[3] Consequently, Mr. Morris’s argument that a contractor could escape liability for such actions is incorrect. In addition, as to Mr. Morris’s contention that the dismissal matters such as this one would leave aggrieved homeowners without recourse against their contractor, the civil courts provide a forum to resolve such matters. ORDER IT IS ORDERED that Veteran Group’s Motion to Dismiss is granted; IT IS FURTHER ORDERED that on the effective date of the final Order in this matter the Citation in Case No. 2013-5868 is dismissed. 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 is forty days after the date of that certification.

Done this day, July 1, 2016.

/s/ Thomas Shedden Thomas Shedden Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

Courtesy copy transmitted by either mail, e-mail, or facsimile July 1, 2016 to:

Tony Gonzales, Esq. The Law Offices of Gonzales & Poirier PLLC 223 N San Francisco St., Ste. 200-B Flagstaff, AZ 86001-4600 [email redacted]

Mark Morris 6095 S Jakemp Trl Tucson AZ 85747-6002

----------------------- [1] Mr. Morris attached to his Opposition checks to Mr. Robison written by Mr. Cederquist dated October 18, 2012, and February 19 and April 29, 2013, all of which are after the date of Mr. Morris’s contract with Mr. Cederquist. [2] Veteran Group acknowledges that Mr. Robinson did receive $3600, but argues that Veteran Group did not receive any money. Citing to the Decision in Docket. No. 2014A-1158-ROC, Veteran Group argues that the $3600 was solely for the work on the loan application, but the Decision did not contain explicit findings to that effect. [3] The timing of Mr. Cederquist’s payments to Mr. Robinson and some of Mr. Robinson’s testimony in the initial hearing do raise the possibility that Veteran Group or Mr. Robinson may have committed improprieties.

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

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