ALJDEC decisions subject to certification as final

2018A-2547-CPA-ROC · Registrar of Contractors · 2018-11-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 1, 2018 APPEARANCES: Paul J. Sheston, Esq. appeared on behalf of Respondent Alice Gierhahn. Assistant Attorney General Thomas Raine appeared on behalf of the Arizona Registrar of Contractors. ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson _____________________________________________________________________ FINDINGS OF FACT 1. In November of 2016, Respondent purchased a home located at 2402 E. Kramer Circle, Mesa, AZ 85213 (“home”). 2. Respondent purchased the home with the intent to remodel and sell the home. 3. In June of 2017, Respondent sold the home to Jeanie Ann Smith. 4. Respondent’s daughter, Melissa Gierhahn (“Melissa”), was the broker who represented Respondent and Ms. Smith in the sale of the home. 5. Before the sale of the home, Respondent spent approximately $80,000 to remodel the home. 6. Respondent nor her realtor provided the names and Arizona Registrar of Contractors (“Registrar”) license numbers of the contractors who remodeled the home in the Seller Property Disclosure Statement (“SPDS”). 7. Respondent nor her realtor provided the names and Registrar license numbers of the contractors who remodeled the home in the purchase agreement or any other sales documents. 8. In June of 2018, Ms. Smith filed a complaint with the Registrar which contained an allegation that Respondent performed poor work in the remodeling of the home. 9. The matter was assigned to Investigator Daniel Rhoades. 10. Investigator Daniel Rhoades investigates complaints involving unlicensed contracting filed with the Registrar. Investigator Rhoades conducted an investigation and contacted Respondent regarding the remodel and sale of the home. 11. Respondent admitted to Investigator Rhoades that she purchased the home and remodeled it to sell it. Respondent told Investigator Rhoades that it was her first attempt to “flip” a home. Respondent also told Investigator Rhoades that she hired licensed contractors to perform the electrical, plumbing and the hearing, ventilation and air conditioning work. 12. Investigator Rhoades contacted Ms. Smith during the investigation. Ms. Smith’s son-in-law provided Investigator Rhoades with a link to Melissa’s Facebook account which included videos regarding the remodeling of the home. Investigator Rhoades observed that several of the videos had the title, “Melissa /Gierhahn, Arizona Real Estate Extraordinaire and Flipping Guru”. See Registrar Exhibits 11 through 14. Investigator Rhoades also observed that the remodeling displayed on the videos included, but was not limited to kitchen remodel, cabinetry, sink and counters, flooring, painting, carpeting and upstairs master bedroom enchantments to include separate tub and shower, flooring, tile throughout the home. 13. After the completion of the investigation, Investigator Rhoades determined that Respondent acted an unlicensed contractor because she sold the home in less than a year from the time that she purchased and remodeled the home. 14. On August 21, 2018, the Registrar issued a Cease & Desist Order and Civil Citation to Respondent to cease and desist all unlicensed contracting and advertising in the State of Arizona. See Registrar Exhibit 1. The Registrar alleged that Respondent was contracting without a license, which is a violation of Ariz. Rev. Stat. section 32-1151. See id. The Registrar also assessed a civil penalty in the amount of $2,500. 15. On October 21, 2018, the Registrar issued a Notice of Hearing on Citation and Civil Penalty setting the above-captioned matter for hearing on November 1, 2018, at the Office of Administrative Hearings in Phoenix, Arizona. 16. The Notice of Hearing shows that the hearing was to address the charges in the Citation issued and the assessment of a civil penalty. 17. At hearing, Respondent testified that she verbally informed Ms. Smith of the contractors’ information before the home was sold, and that Ms. Smith wrote down the information. Respondent contended that the purpose of the statute is to ensure the seller knows who performed construction work and the purpose was fulfilled. Respondent’s counsel asked Respondent whether it was her understanding that the names of the contractors was sent by email from her realtor to Ms. Smith and Respondent responded, “yes”. However, Respondent provided no written evidence of such an email or disclosure. 18. Respondent also contended that she did not purchase the home with the intent to sell or flip the home. Respondent testified that she purchased the home for either herself and her husband, or her son-in-law and daughter. Respondent testified that after her husband became ill and her son lost his job, she knew that had to continue with the home renovation and sell the home. Respondent testified that she believed that her son lost his job in February of 2017. 19. The Registrar contended that Respondent made improvements to her home and sold it within one year from the time that Respondent purchased the home and completed the home remodel. As a result, the Registrar argued that Respondent operated as an unlicensed contractor. The Registrar contended that Respondent acted as an unlicensed contractor whether or not she originally intended to buy the home for herself or her daughter. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32- 1101 et seq. 2. Complainant bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence. See A.R.S. § 41-1092.07(G)(2); 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). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). 3. Under Ariz. Rev. Stat. section 32-1101(A)(3), “Contractor” is synonymous with the term “builder” and means 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, submits a bid or responds to a request for qualification or a request for proposals for construction services to, does himself or by or through others or directly or indirectly supervises others to: (a) Construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction.

(b) Connect such structure or improvements to utility service lines and metering devices and the sewer line.

4. Ariz. Rev. Stat. section 32-1121(A)(5) provides: This chapter shall not be construed to apply to: 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.

5. The preponderance of the evidence shows that Respondent acted as an unlicensed contractor, which is a violation of Ariz. Rev. Stat. section 32-1151. The weight of the evidence presented at hearing shows that Respondent sold the home to Ms. Smith within one year of the date that she purchased the home and completed the remodeling project. Respondent’s conduct is prime facie evidence under 32-1121 (A)(5) that she remodeled her home with the intent to sell it. Respondent failed to rebut the fact that she remodeled her home with the intention to sell it. Respondent admitted that she completed the home renovation with the intention to sell it. Additionally, Respondent provided insufficient evidence to show that she qualified for an exemption under A.R.S. § 32-1121(A)(6). Respondent provided no direct evidence that she or her realtor provided Ms. Smith with the names of the contractors who remodeled the home, and the Registrar license numbers of those contractors, in all of the sales documents, as required under A.R.S.§ 32-1121(A)(6). 6. 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 civil penalties for 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.[1] 7. The preponderance of the evidence shows that Respondent acted as an unlicensed contractor, which is a violation of Ariz. Rev. Stat. section 32-1151. 8. Therefore, the Tribunal concludes that the assessed civil penalty of $2,500.00 was appropriate. RECOMMENDED ORDER Based upon the foregoing, it is recommended that the Registrar affirm the finding that Respondent violated A.R.S. § 32-1151 and the assessed civil penalty of $2,500 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, November 21, 2018.

/s/ Velva Moses-Thompson Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] A.A.C. R4-9-131 sets forth permissible aggravating 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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