ALJDEC

99F-UA0408-ROC · Registrar of Contractors · 1999-10-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 12, 1999 APPEARANCES: Assistant Attorney General Patti Shelton appeared on behalf of the Registrar of Contractors (“ROC”). Kelly Lee Brentas dba Black Canyon Development appeared on her own behalf. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________ This matter came on for a regularly scheduled hearing on October 12, 1999. Based on the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT In approximately March 1998, Ms. Brentas began to undertake the construction of a 4-plex located at 32590 South Maggie Mine Road, Black Canyon City, Arizona (the “Project”). Ms. Brentas did not at that time hold a contractor’s license issued by the ROC. To date, Ms. Brentas has not been issued a contractor’s license by the ROC. Ms. Brentas testified that in her opinion she does not yet possess the necessary experience to apply for or obtain a contractor’s license. Ms. Brentas’ stated intention for constructing the Project was in part to provide a residence for herself and her husband, and in part to develop rental units. On or about March 23, 1998, in connection with construction of the Project, Ms. Brentas entered into a “General Contractor Agreement” (“Agreement”) with Steven Stanger dba OldTimers Construction Company. The parties stipulated that Mr. Stanger is a licensed general contractor. Mr. Stanger’s responsibilities under the Agreement included (i) initial planning and design, (ii) review of and consultation on plans, bids and contracts for the Project, (iii) supervision as necessary to ensure the Project was built to design and specifications, (iv) assistance in planning and scheduling, and (v) consultation “for any necessary matters concerning [the Project]” (emphasis added). Ms. Brentas agreed to pay Mr. Stanger $25 per hour for his work, with a maximum total cost of $6,000 for the entire Project. Mr. Stanger placed a sign in front of the Project indicating his involvement. Mr. Stanger’s responsibilities under the Agreement also included recommending subcontractors, and all of the subcontractors used on the Project with the exception of one were subcontractors regularly used by Mr. Stanger. However, it was Ms. Brentas – not Mr. Stanger – who entered into contracts with those subcontractors. Ms. Brentas testified that given the high demand for subcontractors in the construction market at that time, it would have been very difficult for her to attract subcontractors without being able to use Mr. Stanger’s name and reputation as a means of introduction. Ms. Brentas paid all of the subcontractors directly for their work on the Project. Ms. Brentas explained that she did so in order to control the Project’s financing. Ms. Brentas testified she spoke with two representatives of the ROC regarding the Project and was told that applicable law and regulation did not preclude her from paying subcontractors directly.[1] Ms. Brentas testified that she considered Mr. Stanger as having ultimate responsibility for the Project. Ms. Brentas further testified she did nothing on the Project without first obtaining Mr. Stanger’s approval, including paying subcontractors for their work on the Project. A fair reading of Ms. Brentas’ Agreement with Mr. Stanger, coupled with Ms. Brentas’ testimony (which the undersigned Administrative Law Judge found to be genuine and credible), reveals that Mr. Stanger had direct supervisory involvement in the construction of the Project. In May 1999, one of Ms. Brentas’ subcontractors (the single non-Stanger subcontractor) filed a complaint against her with the ROC alleging non- payment. In connection with that complaint, ROC investigator John Garner performed a records check and discovered that Ms. Brentas did not hold a contractor’s license. On June 8, 1999, after further investigation, Mr. Garner issued a Citation to Ms. Brentas for contracting without a license in connection with construction of the Project, issued a Cease and Desist Order, and assessed a civil penalty against Ms. Brentas in the amount of $250. CONCLUSIONS OF LAW A.R.S. § 32-1101(A)(3) defines “contractor” as synonymous with “builder,” and includes in the definition of “contractor” any person who for compensation undertakes to construct a building. A.R.S. § 32-1151 makes it unlawful for a person to engage in the business of contracting without having a license or qualifying under an exemption. A.R.S. § 32-1166 authorizes the ROC to issue cease and desist orders and citations to, and to impose civil penalties of not less than $200 but not more than $2,500 upon, persons engaging in any act of contracting in violation of applicable statutes. Under A.R.S. § 32-1121(A)(6), owners of property who are acting as developers and who build structures on their property for sale or rent are exempt from the licensing requirement, provided they have contracted for the project with a licensed general contractor. The reason for the requirement that property owners engage licensed general contractors in connection with the construction of buildings which are to be offered for sale or rent appears self-evident. A licensed general contractor is required by law to meet certain standards, and has certain legal obligations (over which the Registrar exercises jurisdiction) which relate to public health and safety, thus assuring that work performed will not present a danger to the public. Here, it is undisputed Ms. Brentas engaged a licensed general contractor, Mr. Stanger, in connection with the Project. The terms of Ms. Brentas’ agreement with Mr. Stanger as well as Ms. Brentas’ testimony reveal that Mr. Stanger was directly involved in the construction of the Project. Based on the foregoing, the undersigned Administrative Law Judge finds that Ms. Brentas falls under the licensing exemption to set forth in A.R.S. § 32- 1121(A)(6). The undersigned Administrative Law Judge finds the following language in Section 32-1121(A)(6) “Owners . . . who contract for . . . a project with a [licensed] general contractor” to include the situation presented on the facts of this case. Because she falls under an exemption to the licensing requirement, Ms. Brentas did not engage in contracting without a license in connection with construction of the Project and therefore did not violate A.R.S. § 32-1151. RECOMMENDED ORDER In view of the foregoing, it is recommended that the Citation issued to Kelly Lee Brentas dba Black Canyon Development, together with the $250 civil penalty and Cease and Desist Order, be dismissed and vacated. Done this day, October ___, 1999

______________________________________ Daniel G. Martin Administrative Law Judge

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

Registrar of Contractors Mr. Michael P. Goldwater ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

----------------------- [1] While not directly at issue in this matter, the advice Ms. Brentas received from the ROC’s representatives regarding her ability to pay subcontractors directly was probably correct. As set forth in the Conclusions of Law below, Ms. Brentas qualified under A.R.S. § 32- 1121(A)(6) for an exemption to the licensing requirement because she contracted with a licensed general contractor for the Project. That requirement having been met, there does not appear to be any statutory or regulatory prohibition against Ms. Brentas contracting with and paying subcontractors directly.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826