ALJDEC decisions subject to certification as final

2014A-3145-ROC · Registrar of Contractors · 2014-12-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 10, 2014, at 8:00 a.m. APPEARANCES: Respondent Dale Merlin Struemke appeared on his own behalf. The Arizona Registrar of Contractors (hereinafter “Registrar”) was represented by Assistant Attorney General Seth T. Hargraves, Esq. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Dale Merlin Struemke (hereinafter “Mr. Struemke” or “Respondent”) appealed a Civil Citation issued by the Registrar for contracting without a license. The Civil Citation imposed a civil penalty in the amount of $2,500.00. 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 $2,500.00 in civil penalty. FINDINGS OF FACT Background Mr. Struemke is not a licensed contractor in the State of Arizona.[1] On or about August 5, 2014, the Registrar received a Telephone Complaint from the Chief Building Official for the Town of Payson, Arizona (hereinafter “Payson”) alleging that several unlicensed people were performing construction work at 914 N. Scenic Dr., Payson, Arizona. Pursuant to the filing of the Telephone Complaint, an assigned Registrar Investigator, Steven Willoughby (hereinafter “Investigator Willoughby”), initiated an investigation of the complaint. On August 6, 2014, Investigator Willoughby met a Payson Building Inspector at 914 N. Scenic Dr., Payson, Arizona. Investigator Willoughby found that Colton Baker (hereinafter “Mr. Baker”) was the only worker present. Investigator Willoughby verified that Mr. Baker was a licensed contractor.[2] Mr. Baker informed Investigator Willoughby that Mr. Struemke was another contractor who was working at the construction site. Investigator Willoughby then checked the Registrar’s computer database and discovered that Mr. Struemke had previously been the qualifying party and a corporate officer for License No. B-1.106907-C of Struemke Corporation DBA: Struemke Construction. Investigator Willoughby found that License No. B- 1.106907-C of Struemke Corporation DBA: Struemke Construction had expired for non-renewal on April 1, 2012.[3] Investigator Willoughby also discovered that Mr. Struemke had previously been the qualifying party and a corporate officer for License No. B.104489- R. Investigator Willoughby found that License No. B.104489-R was voluntarily canceled on November 30, 2012.[4] On August 7, 2014, Investigator Willoughby issued a Notification Letter and a Warning Letter to Mr. Struemke.[5] Investigator Willoughby determined that Mr. Struemke had violated the provisions of A.R.S. § 32-1151 (Engaging in contracting without a license). A Cease & Desist Order was issued to Mr. Struemke on August 18, 2014, for violating the provisions of A.R.S. § 32-1151. A $2,500.00 civil penalty was assessed in the August 18, 2014 Cease & Desist Order.[6] On September 3, 2014, Mr. Struemke filed a request for an administrative hearing.[7] Testimony of Registrar Investigator Steven Willoughby Investigator Willoughby testified that he is an Investigator with the Registrar of Contractors. Investigator Willoughby stated that he investigates complaints of unlicensed contracting and complaints of violations of A.R.S. § 32-1165 (advertising without a license), as well as workmanship complaints, for the Registrar. Investigator Willoughby testified that he conducted the investigation of Mr. Struemke and prepared the Official Departmental Report. Investigator Willoughby reviewed and summarized the Official Departmental Report. Investigator Willoughby testified that Mr. Struemke is not a licensed contractor in the State of Arizona. Investigator Willoughby stated that Mr. Struemke was not in compliance with Arizona contracting laws. Investigator Willoughby testified that Arizona contracting law allows an exemption from licensure, with certain limitations, for a “handyman.”[8] Investigator Willoughby stated that Mr. Struemke’s construction work at the 914 N. Scenic Dr., Payson, Arizona 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 Willoughby testified that the homeowner had paid Mr. Struemke $16,067.50 for his work on the residence located at 914 N. Scenic Dr., Payson, Arizona. Investigator Willoughby testified that the Registrar issued a Cease & Desist Order and a Civil Citation for the unlicensed activity, imposing a civil penalty of $2,500.00. Investigator Willoughby’s testimony is found to be credible. Testimony of Dale Merlin Struemke Mr. Struemke acknowledged that he is not a licensed contractor in the State of Arizona. Mr. Struemke acknowledged that he had performed construction work at the residence located at 914 N. Scenic Dr., Payson, Arizona. Mr. Struemke testified that it was a substantial construction project. Mr. Struemke stated that he advised the homeowner that the installation of the wood stove would require a building permit. Mr. Struemke testified that he had been paid more than $1,000.00 for his construction work on the residence located at 914 N. Scenic Dr., Payson, Arizona. Mr. Struemke stated that there was no employment agreement and that he was hired by the homeowner as an hourly employee at $40.00 per hour. Mr. Struemke asserted that he did not believe that he was performing unlicensed contracting because he was working for an hourly rate of $40 per hour. Mr. Struemke acknowledged that no tax forms had been filed for his work as an alleged hourly employee and that no taxes had been paid on the money that he had received for his construction work at the residence. Mr. Struemke testified that he would resolve the tax matter with the Internal Revenue Service when he filed his taxes. CONCLUSIONS OF LAW The Registrar bears the burden of proof to establish Mr. Struemke’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.[9] 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 does not exceed $1,000.00.[10] 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 at least $200.00 and up to $2,500.00 for each violation, but not more than $2,500.00 per day.[11] 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 civil penalty for Respondent’s continuing violation 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.[12] The evidence established a violation of Arizona contracting laws. Thus, a civil penalty is warranted. The evidence established that Mr. Struemke operated as a contractor without a license by performing $16,067.50 worth of construction work that required a local building permit on a construction project located at 914 N. Scenic Dr., Payson, Arizona. This Tribunal concludes that a civil penalty of $2,500.00 is warranted in this case. RECOMMENDED ORDER

Based upon the foregoing, it is recommended that the Registrar affirm the finding that Mr. Struemke violated A.R.S. § 32-1151 and affirm the decision to assess a civil penalty in the amount of $2,500.00, 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 18, 2014.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors

----------------------- [1] See Exhibit 2 (Investigation Report W/Attachments).

[2] License No. R37.175739-R. [3] See Exhibit 2 (Investigation Report W/Attachments). [4] See Exhibit 2 (Investigation Report W/Attachments). [5] See Exhibit 2 (Investigation Report W/Attachments). [6] See Exhibit 3 (8/18/14 Violation and Cease & Desist Order). [7] See Exhibit 4 ((9/3/14 Response and Request for Hearing). [8] See A.R.S. § 32-1121(A)(14). [9] A.R.S. § 32-1164(A)(2). [10] A.R.S. § 32-1121(A)(14). [11] A.R.S. § 32-1166(A). [12] 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