ALJDEC decisions subject to certification as final

2012A-1831-ROC · Registrar of Contractors · 2012-06-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 5, 2012, at 1:00 p.m. APPEARANCES: License Applicant Builders Depot AZ, Inc. appeared through Mark Anthony Stephenson, its Qualifying Party and President; the Arizona Registrar of Contractors appeared through Elizabeth A. Campbell, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. In February 2012, Mark Anthony Stephenson on behalf of Builders Depot AZ, Inc. submitted an Application for Contractor’s License to the Arizona Registrar of Contractors (“the Registrar”). Mr. Stephenson was listed on the application as Builders Depot AZ, Inc.’s qualifying party, president, and secretary. 2. Mr. Stephenson answered “No” to question 12b on the application about whether he had ever been listed on a contractor’s license that had been suspended, revoked, or otherwise disciplined. 3. On or about April 3, 2012, the Registrar sent a letter to Builders Depot AZ, Inc. and Mr. Stephenson, denying the Application for Contractor’s License, in relevant part as follows: You are hereby notified pursuant to A.R.S. § 32-1124 that your license application is denied. We find that the applicant does not qualify for the Class B- General Residential Contractor license based on the following:

1. Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC has failed to establish good character and reputation as required by A.R.S. § 32-1122.D.

2. Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC actions [sic] have resulted in an unremedied hardship or danger or loss to the public in violation of A.R.S. § 32-1122.E.

3. Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC has not resolved the complaints and underlying cause of the revocation of his previous license in violation [sic] A.R.S. § 32-1161.C.

4. Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC has failed to pay civil penalties in violation [sic] A.R.S. § 32-1154.D.

5. Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC is not eligible to receive a new license pursuant to A.R.S. § 32-1139.B.

The following chronology of information substantiates the above grounds for the recommended denial:

False Application Information

This application contains false information in that Mark Anthony Stephenson indicated “No” to question 12b . . . . . . . .

Mark Anthony Stephenson’s “No” answer to Question 12b was false because he has been on a contractor’s license that has been revoked.

Revoked License

On or about December 29, 1997, B- General Residential Contractor License No. 130238 was issued to Mark Anthony Stephenson doing business as Arizona Builders Emporium LLC. Lawrence Arthur De Coster and Christopher Paul De Coster were also listed as Members.

On or about December 11, 2000 License No. 130238 was Cited for failure to comply with a Corrective Work Order In Case No. 01- 0945.

On or about February 23, 2001 License No. 130238 was Revoked in Case No. 01-0945.

License No. 130238 was Revoked in seven other cases:

Case No. 01-0936 Case No. G01-0060 Case No. 01-1147 Case No. G01-0419 Case No. 00-2834 Case No. M01-0186 Case No. 00-2830

Recovery Fund Payouts

The Recovery Fund made payouts in the following claims:

Claim No. 2000-7010350 (RF01-0350) $20,000 (Cause of Action November 20, 1999).

Claim No 2000-7010282 (RF01-0282) $4,534.14 (Cause of Action May 24, 2000).

Claim No 2001-7010569 (RF01-0569) $11,288.00 (Cause of Action August 24, 2000).

Mark Anthony Stephenson submitted a License Application falsely indicating that he was never on a contractor’s license that had been disciplined, when in fact, his license had been Revoked in eight different cases. The Recovery Fund paid out poor workmanship claims on three separate claims against his licenses and has not been paid back and Mark Anthony Stephenson is not eligible to receive a new license.

4. Mr. Stephenson requested a hearing on the Registrar’s employee’s recommended denial of Builders Depot AZ, Inc.’s license application. The Registrar referred the matter to the Office of Administrative Hearings, an independent State agency, for an evidentiary hearing. Hearing Evidence 5. Mr. Stephenson did not dispute the Registrar’s evidence of Arizona Builders Emporium, L.L.C.’s violations of A.R.S. § 32-1154(A). Mr. Stephenson also did not dispute the Registrar’s evidence of Residential Contractors’ Recovery Fund payouts against Arizona Builders Emporium, L.L.C. Instead, Mr. Stephenson argued that he was not associated with that license or involved in the contracting operations of Arizona Builders Emporium, L.L.C. 6. The Registrar withdrew the allegation that A.R.S. § 32-1154(D) provided grounds to deny Builders Depot AZ, Inc.’s license application because none of the orders entered against Arizona Builders Emporium, L.L.C. required it to pay a civil penalty. The Sale of Arizona Builders Emporium, Inc. 7. In September 1997, Mr. Stephenson and his business partner sold their building products distribution business, Arizona Builders Emporium, Inc., to Christopher De Coster and Lawrence De Coster (“the De Coster brothers”). Mr. Stephenson testified that the De Coster brothers requested as a condition of the sale that the business entity of Arizona Builders Emporium, Inc. be changed from a corporation to a limited liability company. 8. Mr. Stephenson testified that in 1997, limited liability companies were a new form of business entity. He testified that he used an escrow company to facilitate the sale and to make sure that everything was done correctly. Mr. Stephenson testified that he changed the name of Arizona Builders Emporium, Inc. to A B E, Inc.[1] to make the name, “Arizona Builders Emporium, L.L.C.,” available to the De Coster brothers. 9. Mr. Stephenson testified that under A.R.S. §§ 29-603(B) and 29- 603(C),[2] he was required to become a member of the new limited liability company to reserve and transfer the name. The Articles of Organization for Arizona Builders Emporium, L.L.C. listed Mr. Stephenson as a member. Mr. Stephenson signed the Articles of Organization on September 29, 1997. 10. The records of the Arizona Corporation Commission (“ACC”) for Arizona Builders Emporium, L.L.C. included a Bill of Sale for $25,000.00 dated November 15, 1999.[3] In the Bill of Sale, Mr. Stephenson acknowledged that he had taken the following actions: (1) Delivered 100% of his interest in Arizona Builders Emporium, L.L.C. to the De Coster brothers, (2) Resigned his position as a member in Arizona Builders Emporium, L.L.C., and (3) Acknowledged that he did not have any ownership position in Arizona Builders Emporium, L.L.C. 11. A printout from the ACC dated June 5, 2012, showed that Mr. Stephenson was still listed as a member of Arizona Builders Emporium, L.L.C. and that Articles of Termination had been filed on May 7, 2012. 12. Mr. Stephenson testified that he had no voting rights in Arizona Builders Emporium, L.L.C. and that he did not know that he was still listed on ACC’s records for Arizona Builders Emporium, L.L.C. Arizona Builders Emporium, L.L.C.’s License History 13. Arizona Builders Emporium, L.L.C. filed an Application for Residential Contractor’s License t[4]o the Registrar on or about December 9, 1997. Arizona Builders Emporium, L.L.C.’s application listed the De Coster brothers and “Mark Anthony Stephens” as members.

14. Mr. Stephenson pointed out that “LLC” had to be handwritten on the application because it was not an available option on the form that the Registrar used in 1997. 15. Mr. Stephenson testified that he did not know that the De Coster brothers intended to apply for a contractor’s license when he sold them the building products distribution business of Arizona Builders Emporium, Inc. Mr. Stephenson denied ever signing or consenting to be included on Arizona Builders Emporium, L.L.C.’s application. Mr. Stephenson testified that if he had agreed to be listed on the license, his name would have been spelled correctly.[5] 16. The narrative of the consumer complaint in Case No. G01-0419 stated that when the complainants went to Arizona Builders Emporium, L.L.C.’s warehouse, they spoke to “Mark Stephenson/President of the company.”[6] 17. A copy of a cancelled check that had been submitted to support the homeowners’ claim to the Residential Contractors’ Recovery Fund in Case No. RF01-0282 had been endorsed by someone named “Mark” with a signature that was similar to Mr. Stephenson’s signature on Builders Depot AZ, Inc.’s application. 18. The Registrar’s form entitled “Data Entry Misc.” for Arizona Builders Emporium, L.L.C.’s license contained the handwritten notation, “Member resign. for Mark Anthony Stephenson eff. 2/18/00.”[7] Lawrence Mathews, the Chief of the Registrar’s Licensing Department, testified that the Registrar used the form in 2000 to record communications with licensees. 19. Mr. Stephenson testified that he did not know why his name was mentioned in a complaint to the Registrar against Arizona Builders Emporium, L.L.C. Mr. Stephenson denied ever endorsing a check made payable to Arizona Builders Emporium, L.L.C. and testified that he did not know why his name appears on the Registrar’s Data Entry Misc. form for Arizona Builders Emporium, L.L.C. 20. Mr. Stephenson submitted three printouts from the Registrar’s public website for contractor’s licenses on which he was listed as qualifying party: (1) License No. B-5.167682-R first issued to Cabo Pool and Spa, Inc. on August 6, 2001; (2) License No. A-9.182187-C first issued to Cabo Pool and Spa, Inc. on February 5, 2003; and (3) License No. B.243301-R first issued to Valley Crest Building Systems, L.L.C. on March 20, 2008. Although the Registrar’s public website shows numerous administrative suspensions of these licenses for lack of bond or lack of a qualifying party, the website did not show any complaints or discipline.[8] Mr. Stephenson testified that every two years, he applied to renew the licenses and that the Registrar always granted the license renewals. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[9] 2. Builders Depot AZ, Inc. bears the burden of proof to establish that it meets statutory qualifications for a contractor’s license by a preponderance of the evidence.[10] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[11] 3. Mr. Stephenson testified that his association with Arizona Builders Emporium, L.L.C. ended in 1997 with the sale of the building products distribution business of Arizona Builders Emporium, Inc. and the change of the entity from a corporation to a limited liability company. The Registrar presented evidence that Mr. Stephenson was listed on Arizona Builders Emporium, L.L.C.’s license application, was listed by the ACC as a member of Arizona Builders Emporium, L.L.C. until its termination in May 2012, was mentioned by name in one consumer complaint against Arizona Builders Emporium, L.L.C., and was mentioned on the Registrar’s internal record as resigning from Arizona Builders Emporium, L.L.C.’s license in 2000.[12] The Registrar’s evidence undermines Mr. Stephenson’s explanations. 4. Mr. Stephenson did not establish that his association with Arizona Builders Emporium, L.L.C. ended in 1997 or that he was not associated with Arizona Builders Emporium, L.L.C. when its license was revoked in the eight cases listed on the Registrar’s April 3, 2012 letter. Therefore, Builders Depot AZ, Inc. has not met its burden to establish the following: 1. That Mr. Stephenson is a person of good character and reputation, as required by A.R.S. § 32-1122(D),[13] or 2. That Mr. Stephenson or Arizona Builders Emporium, L.L.C. has repaid the Residential Contractors’ Recovery Fund for payouts made to homeowners for damages caused by Arizona Builders Emporium, L.L.C.’s violations of A.R.S. § 32-1154(A), as required by A.R.S. § 32- 1139(B).[14] 5. Therefore, Builders Depot AZ, Inc. has not met its burden to establish that it is qualified to be licensed as a Class B- General Residential Contractor in Arizona.[15] RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s order, the Registrar affirm the decision to deny Builders Depot AZ, Inc.’s application for a contractor’s license and dismiss this appeal. 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, June 26, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] There is no documentation in the record with the new name of the corporation. [2] A.R.S. § 29-603 is entitled, “Reservation of name,” and provides in relevant part as follows: B. The reservation shall be made by filing with the commission an application that is executed by the applicant or an authorized agent of the applicant to reserve a specified name. If the commission finds that the name is available for use by a domestic or foreign limited liability company, it shall reserve the name for the exclusive use of the applicant for a nonrenewable period of one hundred twenty days from and after the date the application is filed with the commission. C. The right to the exclusive use of a reserved name may be transferred to another person by filing with the commission a notice of the transfer that is executed by the applicant or an authorized agent of the applicant for whom the name was reserved and that specifies the name to be transferred and the name and address of the transferee. The transfer shall not extend the term during which the name is reserved. [3] See the Registrar’s Ex. 3 at 4. [4] See the Registrar’s Ex. 2 at 1. [5] The Registrar’s public website presently does not include a record of Arizona Builders Emporium, L.L.C.’s license. Even if Mr. Stephenson’s correct name was not included on the Registrar’s record due to the misspelling of his name on Arizona Builders Emporium, L.L.C.’s application, grounds would exist to deny Builders Depot AZ, Inc.’s application if Mr. Stephenson was a principal in Arizona Builders Emporium, L.L.C.’s contracting operations when the violations occurred that led the Registrar to revoke its license. See A.R.S. § 32-1122(B)(1)(d). [6] See the Registrar’s Ex. 14 (claim to Fund) and Ex. 16 (check). [7] See the Registrar’s Ex. 17. [8] According to the Registrar’s public website, as of June 25, 2012, License Nos. B-5.167682-R and B.243301-R were suspended for lack of bond and License No. A-9.182187-C was expired. [9] See A.R.S. § 32-1122. [10] See A.R.S. § 41-1092.07(G)(1); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [11] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [12] The check endorsement referenced at Finding of Fact No. 17 is not sufficiently reliable or probative to be considered in support of this recommended decision. [13] A.R.S. § 32-1122(D) provides in relevant part as follows: 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 that, if committed or done by any licensed contractor, would be grounds for suspension or revocation of a contractor's license or by showing that the person was named on a contractor's license that was suspended or revoked in another state. [14] A.R.S. § 32-1139(B) provides as follows: If any amount is paid from the fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent a year. Any person who is or was, at the time of the act or omission, named on a license that has been suspended because of a payment from the recovery fund is not eligible to receive a new license or retain another existing license that also shall be suspended by operation of law, nor shall any suspended license be reactivated, until the amount paid from the fund is repaid as provided in this subsection. [15] The Administrative Law Judge does not find additional grounds to deny Builders Depot AZ, Inc.’s application under A.R.S. § 32-1122(E) and A.R.S. § 32-1161(C). A.R.S. § 32-1122(E) states that “[t]o obtain a license under this chapter, a person shall not have had a license refused or revoked, within one year before the person's application . . . .” The Registrar revoked Arizona Builders Emporium, L.L.C.’s license more than one year before Builders Depot AZ, Inc. filed its application. A.R.S. § 32- 1161(C) provides among the rights of a contractor after suspension of license the following: After revocation of a license upon any of the grounds set forth in section 32-1154, the license shall not be renewed or reissued for one year after final determination of revocation and then only on proper showing that all loss caused by the act or omission for which the license was revoked has been fully satisfied. There is no evidence that Mr. Stephenson or Arizona Builders Emporium, L.L.C. has fully satisfied the losses caused by Arizona Builders Emporium, L.L.C.’s violations of A.R.S. § 32-1154(A) that resulted in the eight license revocations. However, A.R.S. § 32-1161(C) by its terms applies only to Arizona Builders Emporium, L.L.C.’s right to renew or reinstate its license.

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