ALJDEC decisions subject to certification as final

2018A-2641-CPA-ROC · Registrar of Contractors · 2018-12-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 28, 2018, 9:00 A.M. APPEARANCES: Arizona Registrar of Contractors was represented by Assistant Attorney General Thomas Raine; Chad Marin Steffen appeared on behalf of Respondent ADMINISTRATIVE LAW JUDGE: Roger A. Geddes _____________________________________________________________________ Based on the evidence in this matter, the undersigned Administrative Law Judge hereby recommends that the Registrar of Contractors affirm in part and reverse in part the Cease and Desist Order and civil penalty issued to Respondent on June 19, 2018. FINDINGS OF FACT Background and Procedure 1. Respondent is not a licensed contractor in the State of Arizona. 2. On or about June 19, 2018, the Registrar of Contractors (“Registrar”) issued Respondent a Cease and Desist Order and Civil Citation against Respondent for failing to comply with A.R.S. § 32-1151 (contracting without a license) with a proposed civil penalty of $1,000.00 for a violation thereof and A.R.S. § 32-1165 (advertising without a license) with no proposed civil penalty. (Register’s Exhibit 1). 3. Respondent requested an administrative hearing and the Registrar forwarded the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 4. The Registrar issued a Notice of Hearing setting a hearing, after continuances, for November 28, 2018, at 9:00 A.M. At the hearing, the Register presented the testimony of Investigators Steve Lawton and Daniel Rhodes. Respondent Chad Steffen testified on his own behalf. The Tribunal received and admitted the Registrar’s exhibit numbers 1 - 6.[1] 5. Investigator Steve Lawton testified that had been on a neighborhood patrol for the Registrar and observed a remodel of a residence in Phoenix, Arizona. (“”residence”). He stated he approached two individuals doing contracting work at the residence who said they were unlicensed and employed by Chad Steffen. Mr. Lawton estimated the remodel to be over $1,000.00 in the aggregate and that he also observed an electrical permit that had been posted on the property. He admitted he did not ask the workers how much they were paid or how long they had been working. He further stated that when Mr. Steffen arrived at the job site, he took a photograph of Mr. Steffen’s truck which on its exterior displayed the name of his business, Everything Home AZ, as well as offers to “Build or repair anything” and “Design Build Maintain” and “Remodel with Us.” (Register’s Exhibit 4). 6. Investigator Daniel Rhodes testified that he followed up with Mr. Lawton’s investigation and issued and delivered the subject cease and desist order to Mr. Steffen. He stated that Mr. Steffen advised him that his girlfriend owned the home. He confirmed that at least one of the individuals that had been doing work for Mr. Steffen was unlicensed. He further testified that the company, Everything Home AZ LLC, is owned by Chad Steffen. (Registrar’s Exhibit 5). He stated that the electrical permit that had been posted on the property indicated the permit was closed June 18, 2018. 7. Respondent Chad Steffen testified that his fiancé, Amy McCardell, owns the residence in question and that he received no compensation for the contracting work he did or oversaw. He stated that he and Ms. McCardell planned to acquire property for rentals and that this property was their first one acquired. He stated Ms. McCardell acquired it in February 2017, as a possible rental but that they were currently in the process of deciding whether to allow a family member of Ms. McCardell to live in it. He stated he expected to share in profits from the rentals once he marries Ms. McCardell. Mr. Steffen testified that he hired three individuals to do some clean-up work at the residence to complete the project. He stated one did work on closets for $150, one did painting for $110-120, and another merely did outdoor work moving dirt and rocks. He stated that Ms. McCardell paid them for their work.. 9. Mr. Steffen further testified that he has a retail store that sells such items as carpet, tile, and cabinets and that he is not advertising to perform contractor service. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[2] 2. The Registrar bears the burden of proof to establish Respondent’s statutory violation by a preponderance of the evidence.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] 3. A.R.S. § 32-1151 regarding engaging in contracting without a required license provides in pertinent 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.

(emphasis added). 4. A.R.S. § 32-1165 regarding advertising contracting services without a required license 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. (emphasis added). 5. A.R.S. § 32-1101(A)(3) defines “Contractor” in relevant part as follows:

"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.

(emphasis added). 6. A.R.S. § 32-1166 regarding the Registrar’s authority to impose civil penalties and to issue cease and desist orders provides in relevant part as follows:

A. 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….

B. Each violation of this chapter or a rule or order of the registrar by a person who is required to be licensed by this chapter and who does not possess the required license shall constitute a separate offense, and the registrar may impose a civil penalty of not to exceed two thousand five hundred dollars for each violation except that for multiple violations committed on the same day the civil penalty shall not exceed two thousand five hundred dollars for all such violations. Monies collected from civil penalties shall be deposited in the state general fund.

C. The registrar of contractors may issue citations containing orders to cease and desist and of civil penalties against persons who have never been licensed under this chapter who are acting in the capacity of or engaging in the business of a contractor in this state.

7. A.R.S. § 32-1151. In this case, the Registrar has established that Respondent has engaged in work for which the aggregate contract price for the entire remodel would have exceeded $1,000.00 and for which a building permit was required in part and was issued. However, at issue is whether Respondent performed the subject work “for compensation” such that Respondent met the definition of contractor under A.R.S. § 32-1101(A)(3). 8. The Tribunal finds that Registrar has not met its burden to show that Respondent received compensation for the work performed or contracted for by Respondent. Respondent testified that he did not receive compensation nor did he expect to receive compensation from his fiancé for the subject work. The Registrar did not contradict such testimony. However, the Registrar argued that because Respondent and his fiancé had planned to ultimately rent out the residence, the rent proceeds presumably collected as husband and wife would constitute compensation for contracting services and thus Respondent would meet the definition of contractor under A.R.S. 32-1101(A)(3). 9. The Tribunal does find the potential for future rentals to be compensation within the meaning of the statute. Presumably, to establish compensation for contracting services, there must be a direct link between the compensation received and the work performed. The typical scenario in these types of cases involves an individual who is directly paid monetarily for contracting services, thereby satisfying the compensation requirement within the statutory definition of contractor. However, unlike the typical situation involving direct payment for services, here it cannot be established that any future rents Respondent may have received would be attributable to his contracting work as opposed to merely resulting by virtue of his impending marriage to Ms. McCardell. There was no evidence that Respondent would receive future rents even if his marriage to Ms. McCardell did not go forward, which would directly link compensation for his services. In any event, the evidence was too attenuated to establish that the subject residence was even going to be rented out or that Respondent would ultimately share in those rentals. Accordingly, the Tribunal finds that under these circumstances, the evidence established that Respondent was not compensated for his contracting services and thus did not meet the definition of contractor under A.R.S. § 32-1101(A)(3). Consequently, Respondent was not acting in the capacity of a contractor in violation of A.R.S. § 32-1151. 10. A.R.S. § 32-1165. The Registrar has met its burden to show that Respondent advertised for services for which a contractor’s license was required. Respondent’s truck exterior displayed no contractor’s license number or any designation that Respondent was not a licensed contractor Respondent contended that his truck merely advertised the products he sells at his showroom and not any services as a contractor. The Tribunal finds that a reasonable consumer may believe otherwise. In addition to Respondent’s truck display offers to “Build or repair anything,” “Design Build Maintain,” and “Remodel with Us,” the truck advertisement also lists services such as flooring, interior and exterior painting, kitchens, bathrooms, fireplaces, and cultured stone. (Register’s Exhibit 4). There does not appear to be any mention or address of a showroom on the truck. Thus, the Tribunal finds that Respondent advertised for services for which a contractor’s license was required 11. Accordingly, the evidence does not support a finding that Respondent is a “contractor” as defined under A.R.S. § 32-1101(A)(3) and acting in the capacity of a contractor without a license in violation of A.R.S. § 32-1151. However, the evidence does support a finding that Respondent advertised for services for which a contractor’s license was required in violation of A.R.S. § 32-1165. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar reverse the finding that Respondent violated A.R.S. § 32-1151 and reverse the decision to assess a civil penalty under A.R.S. § 32-1166 of $1,000.00 for the violation of A.R.S. § 32-1151. It is further recommended that the Registrar affirm the finding that Respondent violated A.R.S. § 32-1165. 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, December 18, 2018.

/s/ Roger Geddes Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] The Tribunal also took administrative notice of the Registrar’s file. [2] See A.R.S. § 32-1101 et seq. [3] 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). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826