ALJDEC

99F-R0025-ROC · Registrar of Contractors · 1999-02-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 17, 1999 at 1:30 p.m. APPEARANCES: Complainant appeared through its attorney, Patti Shelton, Esq., Assistant Attorney General; Respondent appeared through its qualifying party, R.M. Bjornson ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

The parties presented evidence and testimony and, based upon the entire record, the undersigned makes the following Findings of Fact, Conclusions of Law and Recommended Order. STATEMENT OF FACTS The Registrar of Contractors issued License No. 068955, Class B, to Respondent on October 9, 1987. In August 1997, Respondent contracted to construct a new single-family residence for Robert E. Hill in Phoenix, Arizona at a cost of $236,500. At that time, Respondent only possessed a bond in the amount of $5,000, which allowed it to perform an annual volume of construction work valued at $150,000 or less under A.R.S. § 32-1152(B)(1)(f). After the Registrar issued the Citation and Complaint in this matter, however, Respondent obtained a bond in an adequate amount. On July 7, 1998, Mr. Hill contacted the Registrar’s investigator Irl Young, who investigates unlicensed contracting activities that violate A.R.S. § 32- 1151. Mr. Hill complained to Investigator Young about Respondent’s workmanship on the residence and alleged that it had used unlicensed contractors. After Mr. Hill submitted a written complaint, Investigator Young referred to one of the Registrar’s inspectors the workmanship issues. Mr. Hill has made a complaint against Respondent’s license to the Registrar and has filed a civil suit against Respondent in superior court to resolve the workmanship issues, which are not at issue in this proceeding. Investigator Young obtained a list of subcontractors on the residence that Respondent had given Mr. Hill and proceeded to determine the license status of each. All but two of the subcontractors listed were either licensed, employed by a licensed contractor, or were not required to be licensed because of the nature or value of the work performed. Respondent’s list of subcontractors showed David Paul Norton as having done some of the painting and Luis Mario Machado as having done some of the finish carpentry. Investigator Young determined that neither Mr. Norton nor Mr. Machado possessed a contractor’s license. When Investigator Young interviewed Mr. Norton, he learned that Respondent had paid $2,605 for painting work on the Hill residence. When Investigator Young interviewed Mr. Machado, he learned that Respondent had paid between $1,500 and $2,000 for finish carpentry work on the Hill residence. . . . . . . . . . When Investigator Young interviewed Respondent’s qualifying party R.M. Bjornson,[1] he was cooperative and agreed that both Mr. Norton and Mr. Machado should have been licensed. Respondent told Investigator Young and testified at the hearing that he did not know that Mr. Norton or Mr. Machado was unlicensed. Respondent admitted he had never asked whether either subcontractor possessed a license and testified that he admitted to Mr. Hill that he “could have” used unlicensed contractors in construction of the Hill residence. Mr. Norton, who appeared at the hearing pursuant to subpoena, testified that he first met Respondent in 1996, when he shared a real estate office with Mr. Norton’s wife. When Respondent learned that Mr. Norton and his wife (whom he subsequently divorced) were thinking of building a home, Respondent provided a rough plan and estimate of the price. Mr. Norton said the cost of painting could be left out because he had been performing maintenance work and painting rental property he owned. Respondent subsequently hired Mr. Norton to paint two houses, including the Hill residence, which he painted in late 1997 and early 1998. Mr. Norton does not remember Respondent asking him whether he had a contractor’s license, but remembers telling Respondent that he was not a professional painter and did not possess some of the equipment that might be needed to paint a new house under construction, such as the Hill residence. Mr. Norton also told Respondent that he did not possess a contractor’s license but was attempting to obtain the four years’ experience that A.R.S. § 32-1122(f)(1) requires to obtain a license. Although a subpoena had issued for Mr. Machado’s appearance at the hearing, he did not appear or testify. Respondent presented the testimony of Alex Koenigsfeld, the cabinet subcontractor on the Hill residence. Mr. Koenigsfeld testified that he employed Mr. Machado to build cabinets because he does not as a general practice subcontract his own work. Although Mr. Koenigsfeld never asked and Mr. Machado never said he possessed a license, Mr. Koenigsfeld assumed that Mr. Machado possessed a license because he said he had worked for several general contractors in the valley but was trying to get out of construction work and into real estate sales. When Respondent asked Mr. Koenigsfeld to perform finish carpentry on the Hill residence, he declined because trim carpentry was outside his field and he had other commitments. Mr. Koenigsfeld recommended Mr. Machado, who he thought was licensed, as a subcontractor to perform finish carpentry on the Hill residence for Respondent. Neither Mr. Machado nor Mr. Norton contested the Registrar’s charge that they had engaged in unlicensed contracting activity in construction of the Hill residence and both paid the fine that the Registrar assessed against them. The Citation and Complaint issued by the Registrar advised Respondent that, if he were found in violation of any contracting law, his prior disciplinary record of final Registrar of Contractors’ orders might be considered in mitigation or aggravation. Accordingly, notice is taken of official records of the Registrar of Contractors, which reveal that, if the Registrar accepts this recommended decision, it will be the only final agency order against Respondent on the Registrar’s current record. Therefore, Respondent’s prior record is deemed to be excellent and, thus, is viewed as a matter in mitigation for any disciplinary penalties to be imposed as a direct result of this case. CONCLUSIONS OF LAW In this administrative proceeding, the Registrar bears the burden of proof and must establish statutory violations by a preponderance of the evidence. See A.A.C. R2-19-119; see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996). “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). A preponderance of the evidence is “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary at page 1064 (6th ed. 1990). A.R.S. § 32-1154(A)(10) allows the Registrar to suspend, revoke, or take other disciplinary action against the license of a contractor does any of the following: Aiding or abetting an unlicensed person to evade the provisions of this chapter, knowingly combining or conspiring with an unlicensed person, allowing one’s license to be used by an unlicensed person or acting as agent, partner, associate or otherwise of an unlicensed person with intent to evade the provisions of this chapter.

A person who aids and abets another’s violation of the law “must be shown to have acted with the intent to bring about the [offense] charged.” State v. Beard, 107 Ariz. 388, 391, 489 P.2d 25, 28 (1971). In the criminal context, “’[i]ntentionally’ or ‘with intent to’ means, with respect to conduct described by a statute defining an offense, that a person’s objective is to cause that result or to engage in that conduct.” A.R.S. § 13-105(6)(a). “’Knowingly’ imports only a knowledge that the facts exist which bring the act or omission within the provisions of the statute using such word. It does not require any knowledge of the unlawfulness of the act or omission.” A.R.S. § 1-215. “’Knowingly’ means, with respect to conduct or circumstance described by a statute defining an offense, that a person is aware or believes that his or her conduct is of that nature or that the circumstance exists. It does not require any knowledge of the unlawfulness of the act or omission.” A.R.S. § 13-105(6)(b). It has long been the law in Arizona and elsewhere, however, that “’[n]otice of facts and circumstances which would put a man of ordinary prudence and intelligence on inquiry is . . . equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose.’” Maricopa Utilities Co. v. Cline, 60 Ariz. 209, 214, 134 P.2d 156 (1943) (quoting Schneider v. Henley, 61 Cal. App. 758, 215 P. 1036, 1038). If A.R.S. § 32-1154(A)(10) is construed consistently with the general rules quoted above, it requires that a licensed contractor have some awareness that he is using unlicensed contractors before penalties may be imposed. Although none of the regulations or statutes require a contractor to ask his subcontractors whether they possess licenses, a contractor who does not make such inquiry does so at his peril because, at some point, a contractor’s ignorance about his subcontractors’ license status becomes contrived, unreasonable, and an invalid defense. The evidence that the Registrar presented at the hearing establishes that, if Respondent did not actually know Mr. Norton was unlicensed, he should have known and, therefore, that Respondent violated A.R.S. § 32-1154(A)(10) with respect to his subcontract with Mr. Norton (Count Two of the Citation and Complaint). The evidence that the Registrar presented at the hearing does not establish that Respondent actually knew or should have known that Mr. Machado was unlicensed, although this is a close question that perhaps would have been resolved against Respondent had Mr. Machado testified at the hearing (Count Three of the Citation and Complaint). A.R.S. § 32-1122(D) provides: To obtain or renew a license under this chapter, each person shall be of good character and reputation. Lack of good character and reputation may be established by showing that a person has committed any act which, if committed or done by any licensed contractor, would be grounds for suspension or revocation of a contractor’s license . . . .

As noted above, the evidence establishes that Respondent violated A.R.S. § 32-1154(A)(10) with respect to his subcontract with Mr. Norton in construction of the Hill residence, which is grounds for suspension or revocation of his license. This violation is evidence of lack of good character and may be considered by the Registrar when Respondent renews his contractor’s license. As noted above, however, Respondent also has an excellent prior record and testified at the hearing that, in the future, he will ascertain the license status of the subcontractors he uses, which should mitigate the effect of the violation. Finally, since Respondent has raised the amount of his bond, the Registrar’s attorney at the hearing withdrew the charge based on violation of A.R.S. § 32-1154(A)(3) and A.A.C. R4-9-112(A)(3) (Count One of the Citation and Complaint) as moot. RECOMMENDED ORDER Based on the foregoing, it is recommended that, Respondent’s License No. 068955, Class B license be suspended on the effective date of the Registrar’s order. It is further recommended that the Registrar assess a fine of $500.00 against Respondent pursuant to A.R.S. § 32-1164(B) for Respondent’s violation of A.R.S. § 32-1154(A)(10). If Respondent pays the fine on or before the effective date of the Registrar’s order, Respondent’s license shall not be suspended and the entire Citation and Complaint in case no. R99-2205 shall be closed.

Done this day, March 2, 1999.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of March, 1999, to:

Registrar of Contractors Michael P. Goldwater 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Joyce Armijo

By ___________________________

----------------------- [1] “Respondent” will be used henceforth in this recommended decision to mean both Respondent corporation and its qualifying party, Mr. Bjornson, who entered and oversaw performance the contract to construct the Hill residence on Respondent’s behalf.

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826