ALJDEC decisions subject to certification as final

2014A-1997-ROC · Registrar of Contractors · 2014-12-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 16, 2014, at 8:00 a.m. APPEARANCES: David Scott Morgan (hereinafter “Respondent” or “Mr. Morgan”) failed to appear. The Arizona Registrar of Contractors (hereinafter “Registrar”) was represented by Assistant Attorney General Seth T. Hargraves, Esq. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Mr. Morgan appealed a Civil Citation issued by the Registrar for contracting without a license. The Civil Citation imposed aggregate civil penalties in the amount of $27,500.00. Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law, and Recommend Order are made, finding a violation and recommending imposition of a total of $27,500.00 in civil penalties. FINDINGS OF FACT Background Mr. Morgan is not a licensed contractor in the State of Arizona.[1] On or about May 16, 2014, the Registrar received a telephone hotline tip alleging that Respondent was performing unlicensed contracting work as Gorilla Industries. The alleged unlicensed construction work was being performed at the corner of Avenue C and 32nd Street, and at 1901 S. 18th Street in Yuma, Arizona by an unlicensed contractor working as “Gorilla something.” Pursuant to the filing of the telephone hotline tip, an assigned Registrar Investigator, Cort Bacon (hereinafter “Investigator Bacon”), initiated an investigation of the complaint. Investigator Bacon conducted a search of the records of the Arizona Corporation Commission. Investigator Bacon found the record of Gorilla Services LLC. The record indicated that the sole member of Gorilla Services LLC was Jonathan W. Lines. The record also indicated that previously, Gorilla Services LLC had listed Mr. Morgan, Taft Company LLC, Joser LLC, and Jonathan W. Lines (hereinafter “Mr. Lines”) as members. On May 21, 2014, Investigator Bacon interviewed Mr. Lines. Mr. Lines stated that he had formed Gorilla Services LLC in an attempt to assist Mr. Morgan. Mr. Lines said that the elders of his church had encouraged him to help out Mr. Morgan. When Investigator Bacon presented Mr. Lines with evidence that Mr. Morgan was already performing construction work under Gorilla Services LLC, Mr. Lines became visibly upset. Mr. Lines denied any knowledge that Mr. Morgan was performing unlicensed contracting under the name Gorilla Services LLC. On June 13, 2014, Investigator Bacon received a telephone call from a local businessman. The businessman informed him that Mr. Morgan was performing unlicensed contracting work under the name “Gorilla something.” The businessman said that Mr. Morgan had been performing unlicensed construction work at Hidden Shores RV Park at the Holiday Inn, the Taco Bell in Yuma, the Holiday Inn in Yuma, and at a residential development being constructed by Mr. Lines. Investigator Bacon then checked the Registrar’s computer database and discovered that Gorilla Services LLC was not a licensed contractor in the State of Arizona.[2] Investigator Bacon discovered that Gorilla Services LLC had filed License Applications for a Class A-14 License and a Class KB-2 License, but that no License had been issued. On June 3, 2014, Mr. Lines withdrew the License Applications for Gorilla Services LLC. Investigator Bacon also discovered that Mr. Morgan previously had been listed on License No. B-2.160128-C of Morgan Development Inc.[3] Investigator Bacon found that License No. B-2.160128-C had been revoked by the Registrar.[4] Investigator Bacon also discovered that Mr. Morgan had been listed on License No. B.131137-R of Morgan Development Inc.[5] Investigator Bacon found that License No. B.131137-R had expired on October 3, 2012.[6] Investigator Bacon also discovered that Mr. Morgan had been listed on License No. K-9.213217-D of Morgan Development Inc.[7] Investigator Bacon found that No. K-9.213217-D had been suspended for non- renewal on November 4, 2013.[8] Investigator Bacon determined that Mr. Morgan was not a licensed contractor in the State of Arizona. Investigator Bacon interviewed the owner of Hidden Shores RV Park Jim Komick (hereinafter “Mr. Komick”) and discovered that Mr. Morgan had been performing unlicensed construction work at the RV Park for years and had repeatedly entered into construction agreements with Mr. Komick’s cousin, Thomas Joseph Komick the owner of TJK Construction for the performance of concrete work at the RV Park.[9] Mr. Komick stated that that he had not bothered to check on Mr. Morgan’s contractor’s license because he had previously employed Mr. Morgan when Mr. Morgan was licensed. Investigator Bacon determined that Mr. Morgan had violated the provisions of A.R.S. § 32-1151 (Engaging in contracting without a license). A Cease & Desist Order was issued to Mr. Morgan on August 12, 2014, for violating the provisions of A.R.S. § 32-1151. A total of $27,500.00 in civil penalties was assessed for thirteen (13) counts of contracting without a license for construction work that Mr. Morgan had performed in the State of Arizona between December 30, 2013 and May 16, 2014.[10] On or about September 18, 2014, Mr. Morgan requested an administrative hearing. Testimony of Registrar Investigator Cort Bacon Investigator Bacon testified that he is an Investigator with the Registrar of Contractors. Investigator Bacon stated that he investigates complaints of unlicensed contracting and complaints of violations of advertising without a license, as well as workmanship complaints, for the Registrar. Investigator Bacon testified that he conducted the investigation of Mr. Morgan and prepared the Official Departmental Report. Investigator Bacon reviewed and summarized the Official Departmental Report. Investigator Bacon testified that Mr. Morgan is not a licensed contractor in the State of Arizona. Investigator Bacon stated that Mr. Morgan was not in compliance with Arizona contracting laws. Investigator Bacon testified that on or about December 30, 2013, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $9,916.00. Investigator Bacon testified that on or about December 31, 2013, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $1,933.00. Investigator Bacon testified that on or about January 15, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $2,262.00. Investigator Bacon testified that on or about February 19, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $39,958.04. Investigator Bacon testified that on or about February 19, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $75,036.00. Investigator Bacon testified that on or about February 27, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $3,111.50. Investigator Bacon testified that on or about March 6, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license by providing an estimate to Paul Rogers of Holiday Inn to perform concrete work at the Yuma Holiday Inn in the State of Arizona for the sum of $39,958.04. Investigator Bacon testified that on or about March 20, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $12,006.00. Investigator Bacon testified that on or about March 31, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $6,236.00. Investigator Bacon testified that on or about March 31, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $9,256.28. Investigator Bacon testified that on or about April 21, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $14,180.04. Investigator Bacon testified that on or about April 31, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with TJK Construction to perform concrete work in the State of Arizona for the sum of $17,054.00. Investigator Bacon testified that on or about May 16, 2014, Mr. Morgan violated A.R.S. § 32-1151 by contacting without a license with Paul Rogers of Holiday Inn to perform concrete work at the Yuma Holiday Inn in the State of Arizona for the sum of $25,000.00. Investigator Bacon testified that the total amount of the aggregate Civil Penalties was limited to $27,500.00 because A.R.S. § 32-1151 placed a cap on Civil Penalties of $2,500.00 per day. Investigator Bacon testified that Arizona contracting law allows an exemption from licensure, with certain limitations, for a “handyman.”[11] Investigator Bacon stated that Mr. Morgan’s construction work did not fit within the handyman exemption because the cost of the construction work was in excess of the dollar amount allowed in the handyman exemption, the construction work was not minor or casual in nature, and portions of the construction work required a building permit. Investigator Bacon testified that Mr. Morgan was paid a total of at least $163,521.90 for his unlicensed contracting work. Investigator Bacon testified that he met with Mr. Morgan on or about September 18, 2014. Investigator Bacon stated that during the interview Mr. Morgan made veiled threats against Inspector Bacon and Inspector Bacon’s family. Investigator Bacon testified that the Registrar issued a Cease & Desist Order and a Civil Citation for the unlicensed activity, imposing total civil penalties in the amount of $27,500.00. Investigator Bacon’s testimony is found to be credible. CONCLUSIONS OF LAW The Registrar bears the burden of proof to establish Mr. Morgan’s violation of A.R.S. § 32-1151 by a preponderance of the evidence. Arizona contracting law prohibits a person from acting as a contractor without a license.[12] The law allows an exemption from licensure, with certain limitations, for a “handyman.” An unlicensed handyman can perform construction work, with certain exclusions, such as that the work does not require a permit, as long as the aggregate price for the job, including labor and materials, does not exceed $1,000.00.[13] The Registrar can order a person who performs contracting without a license and who is not exempt from licensure to cease and desist such activity and may impose a civil penalty of between $200.00 and $2,500.00 for each violation, but not more than $2,500.00 per day.[14] A.R.S. § 32-1121(A)(14) provides 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, but excluding any electrical fixture or appliance that was designed by the manufacturer, that is unaltered, unchanged or unmodified by any person, that can be plugged into a common household electrical outlet utilizing a two pronged or three pronged electrical connector and that does not use any other form of energy, including natural gas, propane or other petroleum or gaseous fuel, to operate or is attached by a nail, screw or other fastening device to the frame or foundation of any residential structure, is less than one thousand dollars. The work or operations that are exempt under this paragraph shall be of a casual or minor nature. This exemption does not apply:

(a) In any case in which the performance of the work requires a local building permit.

(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, or in which a division of the operation is made in contracts of amounts less than one thousand dollars, excluding any electrical fixture or appliance that was designed by the manufacturer, that is unaltered, unchanged or unmodified by any person, that can be plugged into a common household electrical outlet utilizing a two pronged or three pronged electrical connector and that does not use any other form of energy, including natural gas, propane or other petroleum or gaseous fuel, to operate or is attached by a nail, screw or other fastening device to the frame or foundation of any residential structure, for the purpose of evasion of this chapter or otherwise.

(c) To a person who utilizes any form of advertising to the public in which the person's unlicensed status is not disclosed by including the words "not a licensed contractor" in the advertisement

A.R.S. § 32-1151 provides as follows: It is unlawful for any person, firm, partnership, corporation, association or other organization, or a combination of any of them, to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor's license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter. Evidence of securing a permit from a governmental agency or the employment of a person on a construction project shall be accepted in any court as prima facie evidence of existence of a contract.

A.R.S. § 32-1166(A) authorizes the Registrar to assess “a civil penalty in an amount of at least two hundred dollars for each violation but not more than two thousand five hundred dollars for the multiple violations committed on the same day.” With respect to the appropriate amount of the total civil penalties for Respondent’s continuing violations of A.R.S. § 32- 1151, A.R.S. § 32-1166(A) required the Registrar to “adopt rules covering the assessment of a civil penalty that give due consideration to the gravity of the violation and any history of previous violations.” Pursuant to this directive, the Registrar adopted A.A.C. R4-9-131.[15] The evidence established repeated violation of Arizona contracting laws. Thus, civil penalties in the total amount of $27,500.00 are warranted. Credible evidence established that Mr. Morgan operated as a contractor without a license on at least thirteen (13) separate occasions by performing at least $163,521.90 worth of unlicensed construction work in the State of Arizona. This Tribunal concludes that civil penalties of $27,500.00 are warranted in this case. RECOMMENDED ORDER Based upon the foregoing, it is recommended that the Registrar affirm the finding that Mr. Morgan violated A.R.S. § 32-1151 and affirm the decision to assess civil penalties in the amount of $27,500.00, to be paid in certified funds to the Registrar on or before the effective date of the Registrar’s final Order in this matter. 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 shall be forty (40) days from the date of certification. Done this day, December 19, 2014.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] See Exhibit 1 (Investigation Report with Attachments).

[2] See Exhibit 2 (Investigation Report with Attachments). [3] See Exhibit 1 (Investigation Report with Attachments). [4] See Exhibit 1 (Investigation Report with Attachments). [5] See Exhibit 1 (Investigation Report with Attachments). [6] See Exhibit 1 (Investigation Report with Attachments). [7]See Exhibit 1 (Investigation Report with Attachments). [8] See Exhibit 1 (Investigation Report with Attachments). [9] ROC License No. B-128272-R. [10] See Exhibit 2 (Cease & Desist Order). [11] See A.R.S. § 32-1121(A)(14). [12] A.R.S. § 32-1164(A)(2). [13] A.R.S. § 32-1121(A)(14). [14] A.R.S. § 32-1166(A). [15] A.A.C. R4-9-131 sets forth permissible aggravating and mitigating factors to be considered, in relevant part as follows: In assessing a civil penalty as provided for under A.R.S. § 32- 1166(A), the Registrar shall give due consideration to whether the person cited or any individual acting on that person’s behalf has committed one or more of the following acts in determining the gravity of the cited violation: 1. Falsely represented to be a licensed contractor. 2. Failed to perform any work for which money was received. 3. Executed or used any false or misleading documents for the purpose of inducing a person to enter into a contract or to pay money for work to be performed. 4. Made false or misleading statements for the purpose of inducing a person to enter into a contract or to pay money for work to be performed. 5. Failed or neglected to apply funds which were received for the purpose of obtaining or paying for services, labor, materials, or equipment. 6. Performed work that was or had the potential to become hazardous to the health, safety, or general welfare of the public. 7. Performed work that deliberately was in violation of building codes, safety laws, labor laws, workers’ compensation laws, or unemployment insurance laws. 8. Performed work that failed to meet minimum acceptable trade or industry standards or practices or was not performed in a good and workmanlike manner. 9. Has committed any other act which would otherwise be cause for disciplinary action if the person cited had been properly licensed pursuant to A.R.S. Title 32, Chapter 10. 10. Has committed two or more prior violations. 11. Performed work that has caused loss or damage to the structure, its appurtenances, or property being worked upon or has caused loss or injury to any person.

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