ALJDEC

00F-R0022-ROC · Registrar of Contractors · 2000-05-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 3, 2000 APPEARANCES: Patti Shelton, Assistant Attorney General. On behalf of the State Donald Baumgarner, Respondent in his own behalf as D and B Construction No one appeared on behalf of Jaway dba A and B Custom Cabinets ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ Preliminary Issues After review of the Citation and Complaint in this case and during the course of the hearing, the State agreed to limit the scope of the hearing with respect to D B Construction to matters pertaining to the current Class K-B1 License No. 136349, and the prior Class B License, No. 107255. The State’s position removes License No. 107263 from consideration in this hearing as to Donald Baumgarner and D B Construction. That license had been issued to ABCD Inc. and was revoked in Case No. F98-0287, effective on or about September 28, 1998. The revocation was for a deemed admitted violation of A.R.S. §32-1154(A)(11), failure to pay for materials. The evidence shows that Donald Baumgarner (Baumgarner), former President and Qualifying Party of ABCD, Inc. has entered into an agreement with the Babbitt Brothers, the Complainant in Case No. F98-0287, and has made significant payments ($40,000.00 plus) to the Complainant. Also, a civil judgment relating to the same issue was entered for Babbitt Brothers in the Superior Court for Yavapai County in March, 1999. Payment on the remaining amount of approximately $40,000.00 is to be made within a year, under a May 1, 2000 agreement between Baumgarner and Babbitt Brothers. The original amount which was to have been paid under the Registrar’s Order was $64,114.52. The payment agreement with Babbitt Brothers exceeds this amount because it includes interest. Babbitt Brothers has submitted an affidavit recommending that the Registrar maintain “intact” the license (No. 136349), which is the Baumgarner-D B Construction license which is at issue in this hearing. A May 3, 2000 computer printout on this license indicates it was suspended on February 9, 2000, until there was compliance with the Order in Case No. F99-0340. The above does not apply to the Respondent Jaway Inc. dba A and B Custom Cabinets for reasons which will be stated. Findings of Fact 1. Class B License No. 107255 and Class B-01 License No. 107263 were issued to ABCD Inc. (ABCD), on May 15, 1995. The corporate business office was located at 295 South Main Street, Camp Verde, Arizona. The mailing address was Post Office 3276, Camp Verde, Arizona 86322-3276. 2. Ronald Baumgarner (Baumgarner) was the President and Qualifying Party of the licensed corporation. James Acock (Acock) was the Secretary- Treasurer. 3. The corporation also included a business identified as A and B Cabinets (A and B), which was located at 437 South General Crook Tr. In Camp Verde, Arizona. A and B did not have a separate contractor’s license. 4. Baumgarner was in charge of the construction business under the Class B licenses. 5. Acock was in charge of the cabinet business. 6. In May of 1997, Baumgarner separated his contracting business from Acock and A and B. Baumgarner resigned as Qualifying party and President of ABCD, but did not file his resignation with the Registrar of Contractors (Registrar), until June 10, 1998. 7. On or about September 18, 1997, A and B had apparently submitted a Proposal to Ernest Strauch Jr. (Strauch), regarding some cabinet work. At the time A and B was not licensed for any finish carpentry work. 8. On September 25, 1997, the Registrar issued a Class L-60, specialty commercial finish carpentry, License No. 127898, to A and B Custom Cabinets with the principal listed as Jaway Inc. (Jaway). Acock was listed as the Qualifying Party. He was apparently also President of the corporation. Susan and Christopher Acock were listed as other officers of the corporation. On November 13, 1997, the Registrar issued a Class C-30, specialty residential finish carpentry, License No. 129308, to A and B Custom Cabinets, Jaway Inc., with Acock as the Qualifying Party. 9. On December 10, 1997, the A and B Proposal which had been made to Strauch in September, 1997, was apparently accepted by Strauch who made a deposit of $23,850 for new home cabinetry. 10. On June 10, 1998, Baumgarner submitted his resignation with respect to his positions with ABCD for License Nos. 107255 and 107263, to the Registrar. 11. On June 28, 1998, the Registrar issued a Class KB-1, dual commercial and residential, License No. 136349, to D B Construction, Donald Baumgarner Qualifying Party. 12. On July 9, 1998 Strauch signed his complaint against A and B Cabinets and License No. 107255. The complaint was filed with the Registrar July 24, 1998. 13. On August 9, 1998, License No. 107255 was suspended because of the lack of a Qualifying Party. 14. On November 3, 1998 James and Susan Acock filed a personal Chapter 7 Petition for Bankruptcy, Case Number 98-14085-PCT-SSC. The current status of that petition is unknown. 15. On November, 27, 1998 the Registrar issued a Citation and Complaint in Case no. F99-0031, based on the Strauch complaint against A and B Cabinets but captioned against ABCD, License No. 107255. The Citation and Complaint was sent by certified mail to ABCD, Inc. at P.0. Box 3276, Camp Verde, Arizona 86322-3276. The Citation and Complaint were also sent to ABCD Inc. at 437 S. General Crook Trail, Camp Verde, Arizona 86322. 16. The Citation and Complaint alleged violation of A.R.S. §32-1154(A)(1), abandonment and (7), wrongful or fraudulent act. No answer was filed, and on December 18, 1998, the allegations were deemed admitted and the Registrar’s Order was issued. The Order revoked License No. 107255 effective January 22, 1999. 17. On August 3, 1998, the Registrar issued a Citation and Complaint to ABCD in Case No. F98-0287 against License No. 107263. The Complainant was Babbitt Brothers and the complaint was for failure to pay for materials in the amount of $64,114.52 under A.R.S. §32-1154(A)(11), and wrongful or fraudulent act under (A)(7). 18. ABCD failed to answer the Citation and Complaint and the allegations were deemed admitted by Order dated August 24, 1998. ABCD was required to pay the sum asserted by September 24, 1998 or the license would be revoked. ABCD failed to pay as required by the Order and License No. 107263 was revoked. 19. On August 15, 1998, Lad and Libbie Logan filed a complaint against A and B Custom Cabinets and the Class 30 License No. 129308. The Registrar issued a Citation and Complaint which alleged violation of A.R.S. §32- 1154(A)(1) and (7), Case No. 99F-F0061-ROC. The matter came on for hearing on April 15, 1999. The Respondent, A and B Custom Cabinets failed to appear. The violations were found and revocation was recommended by Administrative Law Judge (ALJ), Anthony Halas. 20. License No. 129308 was revoked by the Order of the Registrar, effective June 14, 1999. 21. License No. 127898, the A and B Custom Cabinet license cited in this case, is currently suspended, apparently for failing to renew the license in September, 1999.

Conclusions of Law as to Donald Baumgarner The allegations of the Citation and Complaint concern A.R.S. §32- 1154(A)(21) and are against Baumgarner and Acock as persons currently licensed who were on licenses which have been revoked. 1. As stated in the Preliminary Issues, the State is no longer relying on the revocation of License No. 107263, issued to ABCD as part of the Citation and Complaint against Baumgarner-D B Construction and License No. 136349. This leaves only the revocation of License No. 107255 as a basis for discussion regarding the imposition of possible sanctions under the statute. 2. Although the Citation and Complaint in Case No. F99-0031 was issued November 27, 1998, which was over five months after the Registrar was notified of Baumgarner’s resignation, and License No. 107255 had been suspended in August, 1998, because of the lack of Qualifying Party, it is a contractor-licensee’s responsibility to ensure it will receive properly addressed statutory notice even after it has stopped doing business. Although there are numerous reasons to sustain this conclusion, one is sufficient. The relevant statutes, among them A.R.S. §32-1154(C) and 32-1155 give the Registrar continuing jurisdiction and grant a two year warranty for work by a licensed contractor. The Registrar is charged with enforcing the statutes even after a contractor is out of business or a license has been revoked. To this extent it is incumbent on the licensee, and persons on a license, to protect their interest and reputation by ensuring the Registrar has the necessary information to ensure that the licensee or such person, is noticed of any activity which can affect the person or the license. The evidence shows that notice was properly given to ABCD at its mailing address with the Registrar. The fact that Baumgarner had resigned and this was recorded with the Registrar, does not relieve Baumgarner of the responsibility of doing those things necessary to protect any interest which may be jeopardized due to his relationship to the license which was the subject of the Citation and Complaint and is subject to possible revocation. Once proper notice has been given, and jurisdiction has attached, the resulting revocation which constitutes final administrative action which has not been appealed, cannot be re-litigated irrespective of whether the underlying complaint was proper. Such challenges to the correctness of the Citation and Complaint must be presented in the context of the cited case, by the filing of an answer and the presentation of appropriate argument in the manner set forth by statute. Therefore the violation of A.R.S. §32-1154(A)(21) is proven with respect to Baumgarner-D B Construction and current License No. 136349. Baumgarner was a person named President and Qualifying Party, on a revoked license 107255. It is acknowledged he was not on the license at the time of revocation. This is not determinative for the same reasons previously set forth in this paragraph. 3. Despite the conclusion in paragraph two above, the underlying facts leading up to the revocation may be considered in determining the true responsibility of the Respondent for those things which caused the revocation. The statute A.R.S. §32-1154 grants such discretion to the Registrar. In this case, Baumgarner had no knowledge or involvement with A and B Cabinets regarding the actions resulting in Citation and Complaint No. F99-0031. It must be noted that ABCD’s Class B general contractor’s License No. 107255 does not appear to be appropriate for the cabinetry work which was the substance of the A and B Proposal. The Proposal of September 18, 1997, did not become a contract until December 10, 1997, when it was accepted by Strauch. This was after the new business entity consisting of A and B Custom Cabinets, Jaway and Acock had been issued the Class L-60 and C-30 licenses, 127898 and 129308. Practically and legally it can be legitimately argued that A and B was never licensed and neither it as A and B Cabinets, nor ABCD Inc. entered the contract with Strauch. Rather, the contract was made by A and B Custom Cabinets under the Class C-30 License No. 129308. It should be understood that the above conclusion in no way alters the revocation of License No. 107255, but simply mitigates the violation which has been established against Baumgarner. Based on this conclusion, there does not appear to be any practical purpose for imposing stringent discipline against Baumgarner-D B Construction and License No. 136349 as a consequence of the revocation of License No. 107255 in Case No.F99-0031.

Conclusions of Law as to James Acock 1. No one appeared on behalf of Acock and certain facts are clear in this case. Acock was a person named, (Secretary-Treasurer), on License No. 107255. The consequences of the revocation of the license go against Acock for the same legal grounds pertaining to Baumgarner. The facts of the case show that Acock was the real party involved in Case No. F99-0031 and therefore aggravate rather than mitigate his violation of A.R.S.§32- 1154(A)(21). 2. The revocation of License No. 107263 is also established against Acock. The State did not specifically remove him from the Citation and Complaint because Acock made no attempt to pay Babbitt Brothers as did Baumgarner with respect to Case No. F98-0287. The facts of the case indicate that although Acock was on the license, he had little if anything to do with the construction business which was run by Baumgarner under the two general contractor’s licenses and ran up the debt at Babbitt Brothers. This mitigates the violation of A.R.S. §32-1154(A)(21) as to A and B Custom Cabinets, Jaway Inc. and Acock. 3. The revocation of License No. 129308 in Case No. 99F-0061-ROC (Findings of Fact 19 and 20), clearly establishes another violation of A.R.S. §32- 1154(A)(21), on the part of Acock. 4. The more difficult issue is whether the instant action against A and B Custom Cabinets and Acock is stayed by the United States Bankruptcy Code (Code). The status of the bankruptcy case is unknown. 11 United States Code, Section 362 (a) provides that upon the filing of a Petition in Bankruptcy, certain actions, including administrative actions are stayed. In significant part, the stay applies to any attempt to collect upon a claim against the debtor. It does not apply to the State exercising its legitimate police or regulatory power relating to public health safety and welfare. It is acknowledged that the actions which resulted in the revocation of the three licenses on which Acock was a named person, were brought against a corporate licensee (ABCD, Inc. on License Nos.107255 and 107263, and Jaway Inc. on License No.129308). To this extent the Section 362(a) does not apply to any of those cases because Acock filed a personal bankruptcy. All three revocations concerned some monetary issues but the instant hearing is not an attempt to enforce a money judgment. The revocations also concerned violations of the statutory provisions regarding abandonment and / or wrongful or fraudulent conduct which are legitimate police power or regulatory concerns. The State has a legitimate interest in assuring that contractors deliver products or complete jobs for which they have been paid, and that contractors do not engage in conduct whether fraudulent or wrongful, which results in the consumers of the State being deprived of their money without the promised product or service being provided. Under such conditions, the State is exercising its police or regulatory power and the stay provisions do not apply. A final point is that the Registrar’s police and regulatory power is being exercised against the corporation Jaway, Inc. and not Acock personally. 5. Under A.R.S. §32-1125, any issue with respect to License No.127898 would potentially become moot by September, 2000, because of the failure to renew that license within one year. Under the Code, the better part of discretion is to be completely aware of all the salient facts before rendering a potentially controversial recommendation. The automatic stay provisions of the Code are not to be lightly disregarded but the facts and conclusions as set forth above show that the Registrar is not stayed, is exercising legitimate police and regulatory power, and the following recommendation is not in violation of the Code. Recommended Order In view of the foregoing it is recommended commencing on the effective date of the Order entered in this matter that the Class KB-01 License No. 136349 of D B Construction be placed on probation for a period of One Hundred Eighty (180) days; It is further recommended that commencing on the effective date of the Order entered in this matter that the Class L-60 License No. 127898 of Jaway Inc. dba A and B Custom Cabinets be revoked. Done this day, May 4, 2000

______________________________________ Allen Reed Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2000, to:

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

By ___________________________

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