ALJDEC - Licensing

2024A-07263-CHC-ROC · Registrar of Contractors · 2025-04-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jonathan Birdt,

COMPLAINANT,

v.

Spider Rock LLC

License No. ROC 304828,

RESPONDENT.

No. 2024A-07263-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 11, 2025.

APPEARANCES:

For Complainant: Jonathan Birdt.

For Respondent: Megan Schandle.

For the Registrar of Contractors: Jim Dimond.

ADMINISTRATIVE LAW JUDGE: Samuel Fox

EXHIBITS ADMITTED INTO EVIDENCE: Administrative notice was taken of the Notice of Hearing Packet submitted by the Registrar of Contractors. Complainant’s Exhibits 1 and 2. Respondent’s Exhibits 1 through 16.

_____________________________________________________________________

FINDINGS OF FACT

Spider Rock, LLC (Respondent) was the holder of License No. 304828 issued by the Arizona Registrar of Contractors (Registrar) on April 29, 2016, and maintained as inactive since August 31, 2020.

On or about June 8, 2023, Jonathan Birdt (Complainant) entered into a contract with Respondent for, among other things, construction of a new home.

On or about June 27, 2024, Complainant filed a Licensed Complaint Form with the Registrar, claiming poor work.

The Registrar assigned the complaint to Investigator Jim Dimond, who issued a Jobsite Inspection Notice on July 10, 2024, scheduling the inspection for August 12, 2024.

Investigator Dimond conducted the jobsite inspection on August 12, 2024, and Respondent was present. Following the inspection, Investigator Dimond issued a Written Directive From the Registrar to Respondent on October 18, 2024 that provided as follows:

You are directed to remedy the following violations by the appropriate means:

Complaint Item: 1 - Stone columns not complete. Deck boards lifting up.

Deck ceiling warped and gapping. Painting not complete.

Investigator’s Observation: The columns were complete. The deck boards were complete.

The deck ceiling being warped was being corrected at the time of inspection.

Painting tough ups are needed throughout- there is overspray on the rear double door threshold, at the front entry, the lower floor equipment room, the lower floor storage closet, door jambs, the garage ceiling, at the edge of the stair tread and risers, baseboard at the top of the stairs, Tyvek is visible at the rear patio doors.

Deck door hasn't been painted.

Spray foam was visible on the 2nd floor patio ceiling.

Governing Rule: Violation of any rule adopted by the Registrar; Namely

A.A.C. R4-9-108(a): A contractor shall perform all work in a professional and workmanlike manner. A.R.S. § 32-1154(A)(3) - R4-9-108(A) Workmanship

Complaint Item: 3 - Walls, roof and doors not level or plumb. Pipe terminations not finished.

Investigator’s Observation: In the entry, the wall on the right has a significant bow at the bottom.

Looking up at the vaulted area, both upper walls are not straight.

In the kitchen the wall is crooked and the reveal on the upper cabinet is out of line.

No issues were noted regarding pipes

Governing Rule: Violation of any rule adopted by the Registrar; Namely A.A.C. R4-9-108(a): A contractor shall perform all work in a professional and workmanlike manner. A.R.S. § 32-1154(A)(3) - R4-9-108(A) Workmanship.

The Written Directive required Respondent to notify Investigator Dimond of Respondent’s compliance with the directive prior to 5:00 p.m. on November 8, 2024.

Investigator Dimond also issued a Warning Letter on October 18, 2024, warning that Respondent may be contracting with an inactive license.

No work was completed during the directive period.

On November 13, 2025, the Registrar issued a Citation against Respondent, finding cause to charge Respondent with violations of A.R.S. § 32-1154(A)(3), specifically R4-9-108(A); A.R.S. § 32-1154(A)(17); and A.R.S. § 32-1154(A)(22).

Respondent submitted an Answer to the Citation on December 3, 2024. Respondent’s Answer stated that Respondent was not the contractor on the project. Respondent was the financer in a joint venture, and Sundell Design and Construction, license number 305275, was the contractor.

The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

On January 30, 2025, the Registrar issued a Notice of Hearing on Contested Case setting the hearing for February 28, 2025.

On or about February 19, 2025, Respondent requested that the hearing be continued. On or about February 24, 2025, the parties were notified the hearing was continued to April 11, 2025, at 1:00 PM. The order granting the continuance from the Office of Administrative Hearings advised the parties of how to connect to the hearing via Google Meet.

The hearing was held via Google Meet on April 11, 2025.

Investigator Dimond testified in support of his investigation. He testified that he and his supervisor believed Respondent was acting as a contractor.

Complainant testified in support of Investigator Dimond’s investigation. He testified that Spider Rock was on the property working at times. He testified that Clay Sundell, the contractor-in-name on the project, was just an intermediary with Respondent, and he believed Respondent was the true contractor on the project. He testified that he paid an additional twenty percent for, among other things, supervision, and he believed that Respondent kept those funds.

Respondent’s owner, Philip Wyman Shepard, testified that he had not been a contractor since 2020, when he retired and set his license to inactive. Since that time, his role has been limited to financing development. He testified that Mr. Sundell was the contractor in practice and in contract.

Respondent called multiple subcontractors, nearly all of whom indicated that they had communicated with Clay Sundell about the project. Mr. Sundell testified that he was the contractor on the project, not Respondent, but he was not compensated for his work on the project.

Administrative notice was taken of Respondent’s prior License record on April 18, 2025. According to that record, the above-entitled matter was the only complaint against the license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Respondent’s inactive license does not deprive Complainant of his right to prosecute his complaint or prevent the Registrar from determining the merits of the complaint.

Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. Respondent bears the burden of proof to establish an affirmative defense by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

A.R.S. § 32-1101(3) defines Contractor as follows:

(a) 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:

(i) 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.

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

(iii) Provide mechanical or structural service for any such structure or improvements.

(b) Includes subcontractors, specialty contractors, floor covering contractors, hardscape contractors and consultants who represent that they are able to supervise or manage a construction project for the property owner's benefit, including hiring and firing specialty contractors, scheduling work on the project and selecting and purchasing construction material.

The preponderance of the evidence established that Respondent was acting as a contractor. Respondent supervised Mr. Sundell and the construction and development of the property for compensation.

Respondent argued that Respondent was exempt pursuant to A.R.S. § 32-1121(E), which exempts joint ventures from requiring a license:

E. A joint venture or other combination of persons, firms, partnerships, corporations, associations or other organizations is not required to obtain a separate contractor's license in its own name if all of the following apply:

1. At least one member of the joint venture or combination holds a contractor's license in good standing with the registrar.

2. Each member of the joint venture or combination that acts as a contractor holds a license in good standing with the registrar.

3. Each licensed member of the joint venture or combination only performs work within the scope of that member's contractor's license or licenses.

Respondent’s argument was not compelling. The instant action is not against the joint venture for failing to have a license. It is against Respondent as a previously licensed member of that joint venture, arguing that Respondent was a contractor on that job. A.R.S. § 32-1121(E) does not exempt members of a joint venture; in fact, it requires that at least one member have an active license. A member of a joint venture, who acts as a contractor on a project and does not fall within a safe harbor, may be held responsible for the contracting done by the joint venture.

Respondent’s argument is, essentially, that Respondent was the financier of the development on his property, and the contracting work was truly completed by Respondent’s partner in the joint venture. Such an argument is more appropriately made under A.R.S. § 32-1121(A)(6), which exempts owners of property who develop that property for sale when the owner has an agreement with a general contractor to perform the work. A.R.S. § 32-1121(A)(6) states as follows:

Owners of property who are acting as developers and who build structures or appurtenances to structures on their property for the purpose of sale or rent and who contract for such a project with a general contractor licensed pursuant to this chapter and owners of property who are acting as developers, who improve structures or appurtenances to structures on their property for the purpose of sale or rent and who contract for such a project with a general contractor or specialty contractors licensed pursuant to this chapter. To qualify for the exemption under this paragraph, the licensed contractors' names and license numbers must be included in all sales documents.

This safe harbor does not apply either due to a deficiency in the sales documents. At least one page of the sales contract contained the name of the contractor; however, it did not contain that builder’s license number.

Although Respondent does not fall within a safe harbor and may be held responsible for workmanship issues, Respondent is clearly not the best recipient of the complaint. Pursuant to the joint venture contract, the purchase agreement, and the subcontractors’ testimony, another contractor (who had an active license for some, if not all, of the relevant time), was substantially responsible for the contracting work.

The preponderance of the evidence established that Respondent failed to perform all work in a professional and workmanlike manner in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108(A).

The preponderance of the evidence established that Respondent engaged in contracting while its license was inactive, in violation of A.R.S. § 32-1154(A)(17). At no time during the sale of the property or the construction of the project did Respondent have an active contractors license.

The preponderance of the evidence established that Respondent failed to take appropriate corrective action following a written directive from the Registrar in violation of A.R.S. § 32-1154(A)(22).

Respondent’s belief that it was not acting as a contractor was reasonable under the circumstances; but-for the defect in the sales documents, where the contractor was not sufficiently disclosed, Respondent would have been correct. As a property owner, and under a joint venture, Respondent was working with an actively licensed contractor who conducted nearly all of the actual contracting work. Whether or not Mr. Shepard was ever on the property or whether or not his relatives were on the property or ever assisted the contractor with work is not determinative.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall suspend for one day Respondent’s License No. 304828.

No civil penalty is appropriate in this matter.

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 forty (40) days from the date of that certification.

Done this day, April 25, 2025.

/s/ Samuel Fox

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Tom Cole, Director

Registrar of Contractors

Jonathan Birdt

[email redacted]

LANG THAL KING & HANSON PC

[email redacted]

[email redacted]

Jim Dimond

[email redacted]

By: OAH Staff