ALJDEC decisions subject to certification as final

2014A-4725-ROC · Registrar of Contractors · 2015-07-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING DATES: June 12, 2015, at 8:00 a.m. and June 30, 2015, at 8:00 a.m. APPEARANCES: The Arizona Registrar of Contractors (“the Registrar”) was represented by Seth T. Hargraves, Esq., Assistant Attorney General; Robert Todd Laster (“Respondent”) was represented by T’shura-Ann Elias, Esq., Gregory & Elias, PLC. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On or about September 22, 2014, the Registrar’s Investigator Martha Watson opened an investigation into whether Respondent had engaged in unlicensed contracting in violation of A.R.S. § 32-1151 by removing a solar photo voltaic system (“solar PV system”) from a house located at 2422 Lake Ridge Ave. in Bullhead City, Arizona (“the Bullhead City house”) and moving the solar PV system and installing it on a house located at 4502 Mule Shoe Drive in Kingman, Arizona (“the Kingman house”) for homeowners Charles Grunden and Lynn Grunden.[1] On or about December 8, 2014, the Registrar issued against Respondent a Cease & Desist Order and Civil Citation and assessed two civil penalties in the amount of $2,500.00 each for committing two counts of unlicensed contracting in violation of A.R.S. § 32-1151 by removing the solar PV system from the Bullhead City house and then reinstalling the solar PV system on the Kingman house.[2] After the Cease & Desist Order and Civil Citation and notice of assessment of civil penalties were served on Respondent via certified mail, he requested a 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 June 12 and 30, 2015. The Registrar submitted thirteen exhibits and presented the testimony of two witnesses: (1) Mr. Grunden; and (2) Investigator Watson. Respondent submitted twenty-six exhibits and presented the testimony of two witnesses: (1) Regina Myrick, who had finished the installation of the solar PV system at the Kingman house; and (2) Respondent. Hearing Evidence Respondent testified that he has been in business for eight years as Bullhead Solar Inc., designing and selling solar PV systems to the public. Respondent explained that he performs calculations of the property owner’s electrical needs, designs a solar PV system for the roof or ground, and obtains necessary permits. Respondent testified that because neither he nor Bullhead Solar Inc. are licensed contractors, he hires properly licensed contractors to install the solar PV systems and related contracting work. Respondent testified that 90% of the time, Bullhead Solar Inc. hired John Edward (“Jack”) Plesko, the qualifying part and officer of Electric Plus Inc., License Nos. C-11.210597-C and R-11.219041-R for commercial and residential electrical contracting,[3] to install the solar PV systems. Respondent testified that he was on Electric Plus Inc.’s payroll, that any construction work that he performed on Bullhead Solar Inc.’s contracts for solar PV systems was performed under Electric Plus Inc.’s licenses, and that Mr. Plesko paid him for his construction work. Respondent submitted checks that were made payable to him, drawn on Electric Plus Inc.’s account, and signed by Mr. Plesko dated January 29, 2014; February 20, 2014; March 7, 2014; April 16, 2014 (2 checks); July 14, 2014 (2 checks); October 7, 2014; November 12, 2014; November 24, 2014; December 22, 2014; January 22, 2015 (2 checks); February 6, 2015; February 21, 2015; March 15, 2015; and April 6, 2015.[4] Respondent testified that he explains to property owners that because the solar PV system must be tied into the utility company’s grid, a licensed electrician must install the system and that after Bullhead Solar Inc. has sold a solar PV system, he arranges a second meeting between the property owner, electrician, and himself. Respondent denied that he supervises the licensed contractors whom Bullhead Solar Inc. hires to install solar PV systems. Respondent testified that once he does the design of a solar PV system, he lays the system out on the roof and determines whether or not installation requires penetration through the roof. The electrical contractor or his employees attaches the systems to the roof and performs any necessary roof penetrations. In approximately 2009, Bullhead Solar Inc. sold a solar PV system to Mr. and Mrs. Grunden that was installed on their Bullhead City house. They subsequently decided to move to the Hualapai Mountains outside of Kingman and built the Kingman house. Because the system originally cost approximately $40,000.00 and the real estate appraiser said that it did not add that much value to the house, Mr. and Mrs. Grunden decided to move the solar PV system to the Kingman house. On or about August 8, 2014, Mr. Grunden signed a contract with Bullhead Solar Inc. to remove the solar PV system from the Bullhead City house and reinstall it on the Kingman house, for a total contract price of $3,280.00.[5] Bullhead Solar Inc.’s proposal included $380.00 for additional material to install the system on the Kingman house because its roof was different from the Bullhead City house. The proposal also included $300.00 for permits. Respondent testified that he informed Mr. Grunden that because Respondent is not a licensed contractor, Respondent would need to hire a licensed contractor to install the solar PV system at the Kingman house after it was moved. Mr. Grunden acknowledged that Respondent had stated numerous times that he was not a licensed contractor. On or about August 8, 2014, Mrs. Grunden wrote a check for $1,000.00 to Bullhead Solar Inc. to pay the deposit on the job.[6] On or about September 29, 2014, Mr. Grunden wrote a check to Bullhead Solar Inc. in the amount of $2,280.00 for the balance due under the contract.[7] Removing the Solar PV System from the Bullhead City House On or about September 17, 2014, the solar PV system was disconnected and removed from the Bullhead City house. On October 25, 2014, Investigator Watson interviewed Mr. and Mrs. Grunden at the Kingman house. Mr. Grunden told Investigator Watson that Respondent took the panels down from the Bullhead City house and moved them to the Kingman house.[8] Respondent testified that Mr. Grunden has a handyman business and that he constructed both the Bullhead City house and the Kingman house. Respondent testified that he walked through the project with Mr. Grunden and that Mr. Grunden disconnected the solar PV system, patched the walls, removed the feet that attached the panels to the roof, and replaced tile, using tile that Respondent had provided. Respondent testified that the only physical labor that he did at the Bullhead City house was to help Mr. Grunden offload the panels, inverter, rails, and other material into his truck or Mr. Grunden’s SUV. He and Mr. Grunden then drove their vehicles to the Kingman house. Respondent testified that he did not think that a permit would be required to remove the solar PV system from the Bullhead City house, but that he learned otherwise several months after the system was removed. Although the job had not been red-tagged, on or about December 16, 2014, Respondent filled out a permit application and a Bullhead City Inspection Card for “Demolition – Photovoltaic System Only” for Mr. Grunden to submit to the Bullhead City as owner-builder.[9] Installing the Solar PV System on the Kingman House On or about August 14, 2014, Respondent on behalf of Bullhead Solar Inc. applied for a permit from Mohave County to install the solar PV system at the Kingman house. Respondent listed Electric Plus Inc. as the electrical contractor on the job.[10] On or about September 17, 2014, the panels were installed on the Kingman house. Respondent testified that after he and Mr. Grunden unloaded the solar PV system from their vehicles, Respondent laid the system out on the roof of the Kingman house and wired the panels together. Respondent testified that Electric Plus Inc.’s employee Wes installed the feet to the roof of the Kingman house, attached racks to the feet, and laid the panels on racks. Respondent testified that Mr. Plesko did the wiring for the system at the Kingman house. Respondent testified that Mr. Grunden did the work in the garage, including punching out a wall and installing the inverter. Respondent testified that Mr. Plesko felt that a new disconnect was required for the solar PV system on the Kingman house, even though the 5- year-old disconnect was still code compliant, and that Mr. Grunden just wanted the job done quickly. In Investigator Watson’s October 25, 2014 interview, Mr. Grunden stated that Mr. Plesko smelled strongly of mouthwash and that he suspected that Mr. Plesko was intoxicated on the job.[11] Mr. Grunden also told Investigator Watson that Mr. Plesko was upset because he felt he should have been involved in removing the panels from the Bullhead City house and because Respondent had set up the panels, ran some wiring through the attic, and ran some of the conduit at the Kingman house.[12] Mr. Grunden attributed Mr. Plesko’s bad mood to wanting more money for more work and stated that he did not like Mr. Plesko’s attitude.[13] Mr. Grunden testified that he and Respondent decided to use another electrician.[14] On or about September 17, 2014, Respondent sent an email to Page Perkins at Mohave County, informing her that “[r]egarding my solar permit . . ., could you please change the Electrical Contractor from Electric Plus, Inc. ROC#210597 to G & T, Inc. ROC#189905.”[15] Respondent testified that Mr. Plesko and Electric Plus Inc. had completed 90% of the job installing the solar PV system at the Kingman house before the dispute about the disconnect arose and that he paid Electric Plus for the work. No evidence of Respondent’s payment to Electric Plus Inc. was submitted. On December 9, 2014, Investigator Watson interviewed Jack Plesko. Mr. Plesko denied doing any work at the Kingman house because “they had the wrong parts and there was no bonding, no grounding,” so “I said . . . we need to come back another day and . . . figure out what we’re gonna have to have to do here.”[16] Mr. Plesko did not testify at the hearing. Regina Myrick is the qualifying party and an officer off G and T Electric Inc., License No. CR11.189905-D.[17] Ms. Myrick testified that she was hired to complete the installation of the solar PV system at the Kingman house. Ms. Myrick testified that she hooked up the disconnect and some of the junction boxes on the roof. Ms. Myrick testified that after she hooked up the disconnect, she signed the contractors certification for the job.[18] Ms. Myrick testified that the prewire had already been done and that she understood that Electric Plus Inc. had performed this work. Respondent explained that the payroll checks that he submitted were not for the dates that the solar PV system was removed from the Bullhead City house and installed on the Kingman house because when he did that job, Electric Plus Inc. missed a month of paychecks and that additional checks would be written at the end of the year. Respondent testified that if he had installed the solar PV system on the Kingman house, he would have received a check and that Electric Plus Inc. paid Wes for the job. Wes did not testify and no documentary evidence was submitted to establish Electric Plus Inc.’s payments to any of its employees for the job. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[19] The Registrar bears the burden of proof to establish Respondent’s statutory violations and factors in aggravation of the penalty by a preponderance of the evidence.[20] Respondent bears the burden to establish affirmative defenses and factors in mitigation of the penalty by the same evidentiary standard.[21] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[22] 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.”[23] 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.

A.R.S. § 32-1101(A)(3) defines contractor as “any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that, for compensation, undertakes to or offers to undertake to, purports to have the capacity to undertake to . . ., does himself or by or through others, or directly or indirectly supervises others to . . . [c]onstruct . . . any building . . . .” Respondent acknowledged that he submitted a proposal to Mr. and Mrs. Grunden to remove the solar PV system from the Bullhead City house and install it on the Kingman house and, after they accepted the proposal, applied for a permit to install the solar PV system on the Kingman house and hired and paid Electric Plus Inc. and G and T Electric Inc. to install the system. It appears that Respondent may have engaged in unlicensed contracting by applying for permits and hiring and paying subcontractors to perform work that required a license. A.R.S. § 32-1121(A) sets forth exemptions to licensure requirements, including the following: 4. Any materialman, manufacturer or retailer who furnishes finished products, materials or articles of merchandise and who does not install or attach such items or installs or attaches such items if the total value of the sales contract or transaction involving such items and the cost of the installation or attachment of such items to a structure does not exceed one thousand dollars, 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. The materialman, manufacturer or retailer shall inform the purchaser that the installation may also be performed by a licensed contractor whose name and address the purchaser may request.

5. Owners of property who improve such property or who build or improve structures or appurtenances on such property and who do the work themselves, with their own employees or with duly licensed contractors, if the structure, group of structures or appurtenances, including the improvements thereto, are intended for occupancy solely by the owner and are not intended for occupancy by members of the public as the owner's employees or business visitors and the structures or appurtenances are not intended for sale or for rent. In all actions brought under this chapter, except an action against an owner-occupant as defined in section 33-1002, proof of the sale or rent or the offering for sale or rent of any such structure by the owner-builder within one year after completion or issuance of a certificate of occupancy is prima facie evidence that such project was undertaken for the purpose of sale or rent. For the purposes of this paragraph, "sale" or "rent" includes any arrangement by which the owner receives compensation in money, provisions, chattels or labor from the occupancy or the transfer of the property or the structures on the property.

The Registrar did not establish that Respondent performed construction or actual contracting work on the removal of the solar PV system from the Bullhead City house. Although Mr. Grunden’s statements to Investigator Watson were equivocal and no other contractor was involved in that phase of the project, Mr. Grunden and Respondent both unequivocally testified that Respondent helped Mr. Grunden remove the panels from the roof after Mr. Grunden had unhooked them. Although their testimony may have been self- serving, in the absence of any strong evidence to the contrary, witnesses’ self-interest and the fact-finder’s skepticism are not enough for a party to carry its burden of proof. Therefore, the evidence indicated that Mr. Grunden was working alone as an owner-builder under the exemption set forth at A.R.S. § 32-1121(A)(5) and that Respondent did not perform any construction in the removal of the solar PV system from the Bullhead City house. The Arizona Court of Appeals has held that the exemption set forth in A.R.S. § 32-1121(A)(4) protects an unlicensed materialman who hires licensed subcontractors to install the materials that the materialman has fabricated, as long as the unlicensed materialman does not perform any of the installation himself.[24] The Registrar established that Respondent performed substantial construction work on the installation of the solar PV system at the Kingman house, including setting up panels and running wiring through the attic. Respondent did not establish that when he performed this work, he was employed or supervised by Electric Plus Inc. or any other licensed contractor. 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, 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. . . .

A.A.C. R4-9-131 sets forth factors that the Registrar must consider in determining the appropriate amount of any civil penalty, 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.

The Registrar did not establish any of these factors in aggravation of the penalty. Therefore, a civil penalty in the amount of $1,000.00 for the installation of the solar PV system at the Kingman house is appropriate for Respondent’s violation of A.R.S. § 32-1151. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar affirm the finding that Respondent Robert Todd Laster violated A.R.S. § 32-1151 by installing the solar PV system at the Kingman house and assess a civil penalty in the amount of $1,000.00. The $1,000.00 civil penalty 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, July 16, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit A. [2] See the Registrar’s Exhibit N. [3] See the Registrar’s Exhibit D. [4] See Respondent’s Exhibit R39. [5] See Respondent’s Exhibit R3. [6] See the Registrar’s Exhibit H. [7] See the Registrar’s Exhibit J. [8] See Respondent’s Exhibit R14 (audiorecord).at 2:36 – 3:05. [9] See the Registrar’s Exhibit L; Respondent’s Exhibit R6. [10] See the Registrar’s Exhibit B. [11] See Respondent’s Exhibit R7 at 1, 3. Investigator Watson performed an investigation of Mr. Plesko’s alleged unprofessional conduct, but did not find evidence to substantiate the complaint. Investigator Watson’s investigation of Mr. Plesko may have led to her investigation of Respondent. [12] See Respondent’s Exhibit R7 at 1, 4. [13] See id. at 1, 3. [14] See id. at 5. [15] The Registrar’s Exhibit C. [16] Respondent’s Exhibit R8 at 1. [17] See the Registrar’s Exhibit E. [18] Respondent’s Exhibit R4. [19] See A.R.S. § 32-1101 et seq. [20] 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). [21] See A.A.C. R219-119(B)(2). [22] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [23] Black’s Law Dictionary at page 1220 (8th ed. 1999). [24] See Butch Randolph & Associates, Inc. v. International Fidelity Insurance Co., 212 Ariz. 550, 553 ¶¶ 13-14, 136 P.3d 232, 235 (App. 2006). The Court of Appeals acknowledged that the materialman acted as a contractor as defined by A.R.S. § 32-1101(A)(3) by submitting a bid to provide and install ramadas. See id. at 552 ¶ 9, 136 P.3d at 234. Because the Registrar was not a party to that action, it was not able to argue that the definition of contracting in A.R.S. § 32-1101(A)(3) required a more restrictive interpretation of the exemption set forth in A.R.S. § 32- 1121(A)(4). The Registrar and the Administrative Law Judge are nonetheless bound by the Court’s construction of the scope of that exemption.

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