ALJDEC decisions subject to certification as final

2010A-100040474-ROC · Registrar of Contractors · 2010-11-03

STATE OF ARIZONA OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 22, 2010 (record held open to October 14, 2010)

APPEARANCES: Complainant Arizona Registrar of Contractors was represented by Assistant Attorney General Montgomery Lee, accompanied by Paul Terek, Assistant Chief of Licensing; Respondent was represented by attorney Scott L. Potter, accompanied by Managing Member and Qualifying Party Bill Barnett.

WITNESSES: Paul Terek, ROC Assistant Chief of Licensing Mike Sauer, Respondent’s accountant Bill Barnett, Qualifying Party

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

The Registrar of Contractors (“ROC”) brings this license disciplinary action alleging that Respondent Barnett Roofing LLC’s sole member and Qualifying Party William G. Barnett has been convicted of a felony, failed to disclose the felony conviction on Respondent’s 2003 license application, and lacks the good character and reputation needed to hold a license. Respondent admits to the felony conviction and that it was not disclosed on the 2003 application, but contends that the omission was an oversight and that the conviction was subsequently disclosed in renewal applications. Respondent argues that discipline of the license should not occur and, in the alternative, that any disciplinary action should be greatly mitigated based on the circumstances of this case. Motion to Dismiss Respondent has moved to dismiss the case without a decision on the merits of the allegations. The motion has been fully briefed by both parties.[1] Respondent argues that dismissal is warranted because: (1) the complaint filed by the ROC is barred by the statutory two-year period within which to bring complaints against a license; (2) the ROC has renewed the license several times after disclosure of the felony conviction and should therefore be estopped from bringing an action based on the felony or lack of disclosure;[2] and (3) the equitable doctrine of laches bars the ROC from bringing the complaint. None of these arguments are persuasive. Respondent bases its first argument, that the ROC’s complaint against Respondent is barred by statute, on A.R.S. § 32-1155(A), which imposes a two-year limitation period on the filing of written complaints with the Registrar: Upon the filing of a written complaint with the registrar charging a licensee with the commission, within two years prior to the date of filing the complaint, of an act that is cause for suspension or revocation of a license, the registrar after investigation may issue a citation directing the licensee, within ten days after service of the citation upon the licensee, to appear by filing with the registrar the licensee's written answer to the citation and complaint showing cause, if any, why the licensee's license should not be suspended or revoked. . . . (Emphasis added.)

Because the action that is the basis of the current complaint occurred in 2003 and was not brought to hearing by the ROC until 2010, Respondent argues that the statute above bars the action. A “written complaint” is one filed by a consumer, not a complaint initiated by the ROC. This is clear when A.R.S. § 32-1155(A) is read in conjunction with A.R.S. § 32-1154(B), both of which concern the subject of the ROC’s investigatory and disciplinary powers: “The registrar may on the registrar’s own motion, and shall on the written complaint of any [consumer] . . . investigate the acts of any contractor . . . and may [discipline the contractor].” A.R.S. § 32-1154(B) (emphasis added). Thus, the phrase “written complaint” applies to consumer complaints and only those complaints are subject to the two-year limit. The ROC statutes do not support Respondent’s argument for dismissal. Next, Respondent argues that the ROC has waived its claims because it has renewed the license several times while knowing about the felony conviction. Respondent’s argument is based on A.R.S. § 32-1124(A), which gives the ROC 60 days to review an application and inform the applicant of its decision: Upon receipt by the registrar of the fee required by this chapter and an application furnishing complete information as required by the registrar, the registrar shall notify the applicant within sixty days from the date of the filing of a complete application of the action taken on the application, and if the registrar determines that the applicant is qualified to hold a license in accordance with this chapter, the registrar shall issue a license to the applicant permitting the applicant to engage in business as a contractor under the terms of this chapter.

However, Respondent’s argument fails because, even by Barnett’s own admission, his application did not furnish complete information as required, and the statute does not preclude the bringing of an action claiming that false or incomplete information was submitted. Finally, Respondent argues for relief based on the equitable doctrine of laches. The argument is based on the four-year delay between Respondent’s disclosure of the felony conviction to the ROC and the bringing of this action by the ROC.[3] The ROC argues that laches does not apply in this instance. Laches is a form of equitable estoppel.[4] Estoppel is generally not applicable against the State, except where the government’s wrongful conduct threatens to work a serious injustice and if the public interest would not be unduly damaged.[5] Estoppel will apply against the government only where the government’s actions constitute affirmative misconduct, not mere neglect or oversight.[6] As found below, Respondent has not shown affirmative misconduct by the ROC.[7] At best, Respondent has shown only mere neglect or oversight. Neither has Respondent shown that bringing the charges at this time, as opposed to four years ago, will work a serious injustice to Respondent in this case. Respondent’s motion to dismiss is denied. Decision on the Merits Along with the complaint file in this matter, this tribunal admitted ROC Exhibits 1 through 4 and Respondent’s Exhibit A into the record. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Decision finding violations and recommending revocation of the license. FINDINGS OF FACT 1. Respondent is the holder of a class K-42 specialty dual contracting license (No. 190231) issued by the Registrar of Contractors (“ROC”). The license authorizes Respondent to perform both commercial and residential roofing work. The license is current and active. William Graden Barnett (“Barnett”) is the sole member and Qualifying Party for the business. 2. From 1987 to 2003, Barnett was also the sole owner and Qualifying Party of Barnett Roofing Co., a corporation that held one residential roofing license (69344010) and one commercial roofing license (72740006) issued by the Arizona ROC.[8] Those licenses both expired in 2003. 3. In May 1995, Barnett pled guilty to one count of sexual conduct with a minor, a class 6 felony.[9] His sentence was suspended, and he received 15 years probation with standard terms, two of which included registration as a sex offender and that Barnett have no contact with anyone under 18 years of age.[10] In 1996, Barnett violated his probation,[11] but was placed back on the same level of probation as before.[12] 4. In May 2009, Barnett was found to have successfully completed probation and was given early termination (one year early).[13] 5. Barnett did not disclose his felony conviction to the ROC until November 2005, when he was renewing the K-42 license (190231) for the first time. This means that he failed to disclose the conviction to the ROC through five renewals for each of the earlier licenses (1995, 1997, 1999, 2001, and 2003).[14] 6. Barnett also failed to disclose the felony conviction on his application for the K-42 license (190231) in October 2003.[15] On that application, question 12 asks “Has any person listed [as corporate officer or substantial owner] been convicted of a felony?” Barnett had been listed. The answer checked is “NO.”[16] Clearly, this is a false answer. 7. On his November 2005 renewal, however, Barnett disclosed the felony conviction.[17] 8. The record shows that as of early 2006, the ROC had knowledge of Barnett’s felony conviction and records from the criminal proceedings.[18] The record also shows that in early 2006, the ROC knew that Barnett was on probation and the licensing section of the ROC intended to file a complaint against Respondent based on the felony conviction.[19] The record is silent as to what happened with the case between that time and four years later when the charges were filed. Thus, the only reasonable conclusions are that the ROC had reason to delay the filing of the charges or neglected to do so right away. No affirmative misconduct by the ROC has been shown. 9. In the meantime, the ROC renewed Respondent’s license in 2005, 2007, and 2009.[20] 10. The record does not show that Respondent has ever been found to be in violation of the ROC statutes or disciplined by the ROC. 11. At hearing, Respondent’s accountant, Mike Sauer, testified about his role in the application and renewal process. He testified that he has been Barnett’s accountant for many years and assisted him with corporate matters and licenses. He testified that he filled out the October 2003 K- license application and did not know that Barnett had the conviction, so he marked the “no” box. He testified that Barnett signed the application, however, and did not make any changes to it. After that, Barnett told him of the conviction, and it was disclosed in subsequent renewals. 12. Barnett testified that he did not intentionally hide the conviction, and it was an oversight on his part. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[21] Further, the standard of proof at hearing is by preponderance of the evidence.[22] Therefore, the Registrar bears the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[23] The Registrar has met that burden. 2. The Citation and Complaint charges three counts in violation of three statutory provisions: (1) conviction of a felony in violation of A.R.S. § 32-1154(A)(8); (2) subsequent discovery of facts which if known at the time of issuance of a license would have been grounds to deny the issuance of a license in violation of A.R.S. § 32-1154(A)(20); and (3) lack of good character and reputation in violation of A.R.S. § 32-1122(D) by way of 32-1154(A)(13). 3. The evidence shows violations of all three counts. Respondent admits the conviction and failure to disclose it on the October 2003 application. This tribunal has no doubt that had it been disclosed at that time, the ROC would not have issued the license because Barnett was still on probation. Indeed, Barnett should have disclosed the conviction in 1995, 1997, 1999, 2001, and 2003 during his renewals of the old licenses. That he did not do so undermines his trustworthiness and undercuts his testimony that it was an oversight in 2003. A more plausible explanation is that Barnett did not want the ROC to know about the conviction. Each of the five old license renewals and the 2003 application clearly asked about felony convictions and required the signer (Barnett) to certify that there were none. The evidence shows that Barnett failed to disclose the conviction to the ROC for ten years, a factor that aggravates the violations. 4. The record contains a substantial amount of evidence showing lack of character: the felony conviction itself and hiding it from the ROC for ten years. Almost no evidence of good character was presented by Respondent. Although he completed probation one year early, there is no evidence as to what steps Barnett took, if any, to address the problem that was the root of the conviction. Additionally, that Respondent has not had any disciplinary actions against it is not enough to overcome the aggravating evidence. 5. The evidence supports finding Respondent in violation of all three counts and contains substantial enough aggravating evidence to support revocation of the license. RECOMMENDED ORDER IT IS RECOMMENDED that Class K-42 license 190231, held by Barnett Roofing, LLC, be revoked beginning the effective date of the Registrar’s Order.

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 40 days from the date of that certification.

Done this day, November 3, 2010.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] This is the reason that the record was held open. [2] This amounts to an argument that the ROC has waived its right to bring the present action. [3] See Finding of Fact 8 below. [4] In re Flynn v. Rogers, 172 Ariz. 62, 66, 834 P.2d 148, 152 (1992). [5] Rivera v. City of Phoenix, 186 Ariz. 600, 603, 925 P.2d 741, 744. [6] Id. citing Carlson v. Arizona Dep’t of Econ. Sec., 184 Ariz. 4, 906 P.2d 61 (App. 1995). [7] Finding of Fact 8. [8] Exhibits 3 and 4. [9] Exhibit 2. [10] Id. [11] The records admitted here do not show the nature of the probation violation. [12] Id. [13] Id. [14] Exhibits 3 and 4. Those failures to disclose have not been brought as charges (though they could have been under A.R.S. § 32-1154(C)) and are recited here only for purposes of determining the sanction to be imposed (aggravation/mitigation) should a violation be found. [15] Exhibit 1. [16] Id. [17] Id. [18] Exhibit 2. [19] Exhibit A. [20] Exhibit 1. [21] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [22] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [23] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996).

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