ALJDEC decisions subject to certification as final

2014A-3911-ROC · Registrar of Contractors · 2015-02-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 4, 2015, at 8:00 a.m. APPEARANCES: The Arizona Registrar of Contractors (“the Registrar”) was represented by Seth T. Hargraves, Esq., Assistant Attorney General; Respondent Ralph Tyler Sizemore (“Mr. Sizemore”) appeared on his own behalf via videoconferencing from the Registrar’s Kingman office. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On or about September 29, 2014, the Registrar’s tips hotline received a complaint that Mr. Sizemore was working as a subcontractor on a jobsite located at 3250 Oakwood Drive, Lake Havasu City, Arizona (“the Oakwood Drive jobsite”), even though his contractor’s license had been revoked.[1]

The hotline complaint was assigned to the Registrar’s Investigator Martha Watson because she is responsible for complaints on jobsites in Mohave County. Investigator Watson consulted the Registrar’s records and found that Mr. Sizemore had previously been listed on License No. CR48-177110-D issued to Sizemore Tile LLC and that License No. 177110 had expired on August 1, 2011, and had been revoked on January 25, 2012.[2] Investigator Watson did not find that Mr. Sizemore held any other contractor’s licenses. On or about October 1, 2014, Investigator Watson drove to the Oakwood Drive jobsite. Investigator observed two males in the garage of the home that was under construction with boxes of tile.[3] Investigator Watson also observed a trailer nearby that was visible from the street with the name, Sizemore Tile LLC, and the license number, 177110, on it. Investigator Watson took photographs of the trailer that the Registrar later submitted into evidence.[4] The Oakwood Drive jobsite also had a sign with the general contractor’s name, “Summit Homes,”[5] and a telephone number. Investigator Watson called the telephone number on the sign and Summit Homes’ representative, Aubrey McKown (“Mr. McKown”), answered the call. Investigator Watson identified herself and stated the reason for her call. Investigator Watson reported and testified that when she asked Mr. McKown who was installing tile on the job, he responded, “Sizemore Tile.” Investigator Watson reported and testified that when she asked Mr. McKown if he was aware of Sizemore Tile’s license status or the revocation of its license, he responded that he was not aware of Sizemore Tile’s license status, but that Mr. Sizemore had informed Mr. McKown that past licensing issues had been resolved with the Registrar.[6] Investigator asked Mr. McKown to meet her at the jobsite. Investigator Watson reported and testified that Mr. McKown arrived at the jobsite approximately fifteen minutes later. Investigator Watson reported that Mr. McKown stated as follows: McKOWN stated that he did not check the license status of SIZEMORE as he had been prior told by Sizemore that all problems with his (SIZEMORE’S) license had been taken care of. McKOWN stated that as a general contractor he only utilizes licensed contractors for liability reasons. McKOWN stated that he had contracted with SIZEMORE for six thousand dollars ($6,000.00) and from that amount, he (McKOWN) deducted one thousand five hundred seventy dollars and forty cents ($1,570.40) for the tile and materials that McKOWN purchased. The balance of four thousand four hundred twenty-nine dollars and sixty cent[s] ($4,429.60) will be paid to SIZEMORE upon completion. . . . I explained to McKOWN that I was stopping all work in progress by SIZEMORE, as he is not a licensed contractor[;] McKOWN stated that he understood and would be attempting to employ a licensed contractor.[7]

Investigator Watson testified consistently with her report. Investigator Watson reported further that about ten minutes after Mr. McKown arrived at the Oakwood Drive jobsite, Mr. Sizemore arrived. Mr. Sizemore acknowledged that his license had been revoked, but stated that “he works for McKOWN under his license.”[8] Investigator Watson informed Mr. Sizemore that Mr. McKown had denied that Mr. Sizemore was an employee and stated that Summit Homes had hired Mr. Sizemore as a subcontractor.[9] Investigator Watson reported and testified that Mr. Sizemore acknowledged that he had towed the trailer with the name, Sizemore Tile LLC, and the revoked license number on public streets while en route to the jobsite. Investigator Watson reported that Mr. Sizemore agreed that the trailer constituted advertising.[10] Investigator Watson reported that before she left the jobsite, she observed Mr. Sizemore and his employee “scraping both the AZ ROC number and the expired California Contractors License number from the trailer.”[11] On or about October 1, 2014, Investigator Watson on behalf of the Registrar issued a Cease & Desist Order, a Civil Citation, and imposed civil penalties against Mr. Sizemore in the amounts of $1,500.00 for contracting without a license in violation of A.R.S. § 32-1151 and $1,000.00 for advertising without a license in violation of A.R.S. § 32- 1165.[12] Mr. Sizemore signed the Cease & Desist Order, Civil Citation, and notice of civil penalties to acknowledge receipt.[13] Mr. Sizemore requested a formal hearing. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on February 4, 2015. The Registrar presented the testimony of Investigator Watson and submitted three exhibits. Mr. Sizemore testified on his own behalf. Additional Hearing Evidence Mr. Sizemore acknowledged that his trailer had displayed his company’s revoked license number. Mr. Sizemore explained that he had owned the trailer for ten years and did not know that he needed to remove his company’s revoked license number. Mr. Sizemore testified that before the job, he had informed Summit Homes that he had lost his license and that Summit Homes’ representative told him that he could work under its license. Mr. Sizemore acknowledged that Summit Homes was not withholding any workers’ compensation, taxes, or unemployment insurance from the monies that it paid him for the job on Oakwood Drive. Mr. Sizemore explained that the monies paid to him were reported on a 1099 form.[14] Mr. Sizemore did not know whether Summit Homes’ records would show that he was an employee on October 1, 2014, when Investigator Watson issued the Cease & Desist Order and Civil Citation. Mr. Sizemore acknowledged that he did not have anyone from Summit Homes to testify as to his employment status. Mr. Sizemore testified that after October 1, 2014, Mr. McKown contacted Investigator Watson and that she allowed him to return to the jobsite on the next day. Investigator Watson acknowledged that Mr. Sizemore’s company was allowed to return to the jobsite after he received the Cease & Desist Order because Mr. McKown stated that Summit Homes had hired Mr. Sizemore as an employee. Investigator Watson explained that although Mr. Sizemore was not employed by Summit Homes at the time the Cease & Desist Order and Civil Citation were issued, once Summit Homes formally employed him, he could return to work at the Oakwood Drive jobsite. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[15] The Registrar bears the burden of proof to establish Mr. Sizemore’s statutory violations by a preponderance of the evidence.[16] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[17] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[18] A.R.S. § 32-1151 prohibits contracting without a license, providing in relevant part 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.

Mr. Sizemore did not dispute that employees were performing contracting work at the Oakwood Drive jobsite pursuant to his agreement with Summit Homes to perform tile work. Investigator Watson reported and credibly testified that Mr. McKown told her on October 1, 2014, that Summit Homes only hired licensed subcontractors for liability reasons and that Mr. Sizemore was a subcontractor, not an employee. Mr. Sizemore did not present a job application, tax form, pay stub, or other documentary evidence to support his claimed employment by Summit Homes on the date of Investigator Watson’s jobsite visit; his possibly self-serving testimony alone does not overcome Investigator Watson’s credible testimony. Therefore, the Registrar established that Mr. Sizemore engaged in unlicensed contracting in violation of A.R.S. § 32-1151. A.R.S. § 32-1121(A)(14)(a) sets forth the so-called “handyman’s exemption” to licensure requirements for contractors who perform work whose aggregate contract price, including labor and materials, is less than $1,000.00. The handyman exemption does not apply to the tile job at the Oakwood Drive jobsite because its total price was $6,000.00. A.R.S. § 32-1165 provides as follows: Except as authorized by section 32-1121, subsection A, paragraph 14, subdivision (c), it is a class 1 misdemeanor for any person to advertise that he is able to perform any service or contract for compensation subject to regulation by the registrar under the terms of this chapter unless a license under the terms of this chapter is first obtained regardless of whether his operations as a contractor are otherwise exempt.

A.R.S. § 32-1121(A)(14)(c) provides that “[t]his exemption does not apply . . . [t]o 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.” Mr. Sizemore did not dispute that his company’s trailer showed the company name, Sizemore Tile LLC, and the revoked license number. Although apparently Mr. Sizemore and his employee scratched off the license number, there is no evidence that they scratched out the company name or added the disclaimer, “not a licensed contractor,” as required by A.R.S. § 32-1122(A)(14)(c). Therefore, the Registrar established that Mr. Sizemore violated A.R.S. § 32- 1165 by advertising without a license. A.R.S. § 32-1166(A) authorizes the Registrar to assess a civil penalty against a person who has been found to have contracted without a license in violation of A.R.S. § 32-1151 or to have advertised that he is able to perform a service for which a contractor’s license is required, in relevant part as follows: In addition to all other remedies, when it appears to the registrar, either upon complaint or otherwise, that any person, firm, partnership, corporation, association or other organization, or a combination of any of them, has engaged in or is engaging in any act of contracting, practice or transaction which constitutes a violation of this chapter, or any rule or order of the registrar, the registrar may serve upon such person, firm, partnership, corporation, association or other organization not currently licensed under this chapter, by certified mail or by personal service, a cease and desist order requiring the person, firm, partnership, corporation, association or other organization to cease and desist immediately, upon receipt of the notice, from engaging in such act, practice or transaction. In conjunction with the cease and desist order, the registrar may issue a citation for a violation. Each citation shall be in writing and shall clearly describe the violation for which the citation was issued. Each citation shall contain an order to cease and desist and an assessment of 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. . . .

Although Mr. Sizemore knew that his company’s license had been revoked, he continued to perform subcontracts for contracting work and to advertise his company’s ability to perform contracting on his trailer. Mr. Sizemore testified that he did not know until Investigator Watson informed him that the display of his company name and revoked license number on his trailer violated Arizona’s contracting law. Members of regulated professions are presumed to know the law, however, and will be bound by statutes and regulations that regulate their profession: [T]here is no general due process requirement that the government give notice of the enactment of legislation, criminal or otherwise. . . . The promulgation of a law by a legislature in accordance with its constitutional obligations is deemed to constitute adequate notice to all. . . . As our supreme court has explained: "The administration of justice, the law itself as a practical system of the regulation of human conduct, requires that some fundamental assumptions should be made as postulates. The most important of all these is the assumption that all persons of sound and mature mind are presumed to know the law." Merrill v. Gordon, 15 Ariz. 521, 532, 140 P. 496, 500 (1914) (citation and internal quotation omitted); see also State v. Morse, 127 Ariz. 25, 31, 617 P.2d 1141, 1147 (1980) ("It is generally accepted that ignorance, or lack of knowledge, of the law which forbids the conduct with which one is charged is no defense.").

This concept of ignorance of the law being no excuse is codified in Arizona in A.R.S. § 13-204(B) (2001). See 1 Rudolph J. Gerber, Criminal Law of Arizona § 1-204(B) (2d ed. 1993) ("The underlying assumption of this section is that the content of the criminal law approximates the average person's actual assessment of tolerable behavior and that the citizenry knows everything needed to obey the law.").[19]

Under this well-established authority, Mr. Sizemore’s claimed ignorance of the law is not a defense. Although Mr. Sizemore know that his company’s license was revoked, he continued to act as a contractor. Therefore, a civil penalty in the amount of $1,500.00 is appropriate for Mr. Sizemore’s unlicensed contracting activities in violation of A.R.S. § 32-1151. Although Mr. Sizemore knew that his company’s license had been revoked, he continued to advertise its ability to perform contracting work on his trailer. This misrepresentation supports imposition of a civil penalty in the amount of $1,000.00 for Mr. Sizemore’s advertising without a license in violation of A.R.S. § 32-1165. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar affirm the finding that Respondent Ralph Tyler Sizemore violated A.R.S. §§ 32-1151 and 32-1165, affirm the assessment of a civil penalty in the amount of $1,500.00 for Mr. Sizemore’s unlicensed contracting in violation of A.R.S. § 32-1151, and affirm the assessment of a civil penalty in the amount of $1,000.00 for his advertising without a license in violation of A.R.S. § 32- 1165. The combined total of $2,500.00 in civil penalties shall be paid in certified funds to the Registrar on or before thirty days after the effective date of the 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 will be five days from the date of that certification. Done this day, February 12, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 1 at 1. [2] See id. at 2; the Registrar’s Exhibit 2 at 6. [3] See the Registrar’s Exhibit 2 at 2. [4] See id. at 2, 5. [5] According to the Registrar’s public website, it issued License No. B.082898-R to Summit Homes, a partnership. Aubrey Hiram McKown and John Allen McKown are listed as partners on Summit Homes’ license. [6] See id. at 2. [7] Id. [8] Id. at 3. [9] See id. [10] See id. [11] Id. [12] See the Registrar’s Exhibit 3. [13] See the Registrar’s Exhibit 3 at 3. [14] Employers generally provide W-2 forms to their employees and 1099 forms to their subcontractors to inform the Internal Revenue Service of taxable amounts paid to these persons: In the United States, corporations, small businesses and other employers use a variety of forms to record the income earned by employees and independent contractors. Typically, employees of a business in the U.S. receive a W-2 form that lists the income they received during the year. This form also contains deductions taken from that income in the form of federal and state taxes, deferred compensation and Social Security contributions, to name a few. A 1099 form is used for various reasons, but it typically is given to an independent contractor — also known as a freelancer — as a record of the income that he or she received from a particular business. Other versions of the 1099 can be used to report different types of income, such as interest, dividends, real estate sale proceeds and debt cancellation. http://www.wisegeek.com/what-is-a-1099-form.htm [15] See A.R.S. § 32-1101 et seq. [16] See A.R.S. § 41-1092.07(G)(3); A.A.C. R2-19-119(A) and A.A.C. R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [17] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [18] Black’s Law Dictionary at page 1220 (8th ed. 1999). [19] State v. Soltero, 205 Ariz. 378, 380 ¶¶ 7 and 8, 71 P.3d 370, 372 (App. 2003) (some citations omitted).

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