FINACT2014A-1576-ROC.pdf

2014A-1576-ROC · Registrar of Contractors · 2014-08-04

BEFORE THE REGISTRAR OF CONTRACTORS

OF THE STATE OF ARIZONA

IN THE MATTER OF THE APPLICATION ) ) CASE NO: 2014-1576 OF: ) BD Construction Unlimited AZ, Inc. ) ) DOCKET NO. 2014A-1576-ROC Pending License No. CR61.289029-D ) ) RESPONDENT ) ORDER )

The Registrar adopts the Administrative Law Judge's (“ALJ”) Findings of Fact with the following modifications: On page 1, line 10 replace “Charles” with “Thomas Lawrence”. The Registrar rejects the attached Administrative Law Judge’s Conclusions of Law Nos. 1 and 2, and

substitutes the following: “1. The burden of proof to meet the qualifications for licensure is on Applicant. See A.R.S. § 41- 1092.07(G)(1). 2. One of the qualifications that an applicant must show is that the persons named on the license are persons of good character and reputation. See A.R.S. § 32-1122(D). 3. If an applicant makes a prima facie showing of good character and reputation, the Registrar may rebut the applicant’s showing with any admissible evidence, and may conclusively establish the applicant’s lack of good character and reputation by showing that a person listed on the application has engaged in contracting without a license, has committed any act that, if committed by a licensee, would be grounds for disciplinary action against a licensee, or was listed on a contractor’s license that was suspended or revoked in another state. Id.” Justification: Conclusion of Law Nos. 1 and 2 are rejected because they proceed from two mistakes of law. First, the ALJ incorrectly construed § 32-1122(D) to limit Registrar’s ability to judge character and reputation to only the three categories of conduct enumerated in § 32-1122(D). Next, the ALJ improperly placed the initial burden of proof on the Registrar to demonstrate that the applicant’s qualifying party lacked good character and reputation. I. A.R.S. § 32-1122(D)’s Three categories of conduct constituting lack of good character per se are not the exclusive criteria for evaluating character and reputation. The ALJ’s interpretation of § 32-1122(D) is inconsistent with long-held principles of statutory construction. When interpreting statutes, the court assumes that the legislature says what it means. Hughes v. Jorgenson, 203 Ariz. 71, 73, 50 P.3d 821, 823 (2002). “Words and phrases [are construed] according to the

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 common and approved use of the language.” A.R.S. § 1-213. “The words of [a] statute must be given their

ordinary common meaning unless it appears from the context or otherwise that a different meaning is intended.” Martinez v. Indus. Comm'n of Arizona, 175 Ariz. 319, 322, 856 P.2d 1197, 1200 (Ct. App. 1993). Courts “construe related statutes together, and avoid interpretations that render statutory provisions meaningless, unnecessary, or duplicative. . .” Arizona Dept. of Revenue v. Action Marine, Inc., 218 Ariz. 141, 143, 181 P.3d 188, 190 (2008) (internal citations omitted). “Each word, phrase, clause, and sentence [of a statute] must be given meaning so that no part will be void, inert, redundant, or trivial.” City of Phoenix v. Yates, 69 Ariz. 68, 72, 208 P.2d 1147, 1149 (1949)(emphasis added); see also, Harris Corp. v. Arizona Dept. of Revenue, 233 Ariz. 377, 382, 312 P.3d 1143, 1148 (Ariz. Ct. App. 2013). A. The ALJ’s interpretation of § 32-1122(D) disregards the plain language of the statute.

In interpreting statutes, “[the] use of the word ‘may’ generally indicates permissive intent . . . while ‘shall’ generally indicates a mandatory provision . . . If a statute employs both mandatory and discretionary terms, [a court] may infer that the legislature intended each term to carry its ordinary meaning.” Walter v. Wilkinson, 198 Ariz. 431, 432, ¶ 7, 10 P.3d 1218, 1219 (App.2000) (citations omitted); HCZ Constr., Inc., 199 Ariz. at 365, ¶ 15, 18 P.3d at 159 (citations omitted); City of Chandler v. Arizona Dept. of Transp., 216 Ariz. 435, 438-39, 167 P.3d 122, 125-26 (Ct. App. 2007). A.R.S. § 32-1122(D) reads: 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 engaged in contracting without a license or 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.

A.R.S. § 32-1122(D) (emphasis added). The statute uses both “may” and “shall,” thus it is proper to infer that the legislature intended “may” as used in § 32-1122(D) to be permissive. Further, the statute commands that lack of good character may be established—not merely shown, but established—by the conduct listed in § 32- 1122(D). The ALJ’s interpretation disregards the plain language of the statute, and improperly reads the words “may be established” as “shall be shown” or as “may only be shown.” This is not what the legislature intended. Further, the ALJ applied a definition to “good character and reputation,” which is outside the common usage, and renders part of the statute meaningless. If good character and reputation can only be defined by the conduct listed in § 32-1122(D), then the legislature would not have made “good character and reputation” a condition to licensure at all, it would have simply stated that an applicant “shall not have committed” any of the

conduct listed in § 32-1122(D). Indeed, the legislature used this very construction in the next section, § 32-

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 1122(E).1 If the legislature had intended the ALJ’s construction, it would simply have added all of the items

listed in § 32-1122(D) to Section (E) as it did with the prohibition on unlicensed contracting. Instead, the legislature used two different constructions, side by side, to accomplish two different tasks. Section 32-1122(E) functions as a list of forbidden conduct, whereas § 32-1122(D) functions as a requirement with examples of specific conduct that establish—per se—that the requirement has not been met. The ALJ’s interpretation renders the requirement that an applicant affirmatively establish “good character and reputation” superfluous. This interpretation cannot stand if the required showing of “good character and reputation” is to be given meaning. See Arizona Dept. of Revenue, 218 Ariz. at 143. Further support for the Registrar’s interpretation is found in the items the legislature added to supplement the concept of “good character and reputation.” Many of the items listed in § 32-1122(D) don’t

necessarily reflect on “good character and reputation” as it is commonly understood. 2 However, based on the exigencies of the construction field, and the regulation thereof, the legislature saw fit to supplement the common understanding of good character with specific items it viewed as conclusively establishing lack of good character. Conversely, many items of conduct not specifically mentioned by the legislature are very probative of “good character and reputation” as it is commonly understood, thus it is unreasonable to infer that these items3 were intentionally excluded from the calculus. B. Other principles of statutory construction mandate that the Registrar’s interpretation be followed “When statutory language is subject to differing interpretations . . . [the court] must consider the consequences of alternative statutory constructions to see what light they shed on the proper interpretation of the statute. In this analysis, [the court is] not bound by the literal meaning of the terms employed, but are guided by the spirit and intent of the law.” Walter v. Wilkinson, 198 Ariz. 431, 433, 10 P.3d 1218, 1220 (Ct.

App. 2000) (citations omitted). Arizona case law has consistently held that the primary purpose of regulating contractors through licensing is to protect the public from unscrupulous and unqualified persons acting as contractors. Northen v. Elledge, 72 Ariz. 166, 232 P.2d 111 (1951); State v. Heritage Shutters, Inc., 23

1 A.R.S. § 32-1122(E) Reads: To 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, or shall not have engaged in the contracting business, nor shall the person have submitted a bid without first having been licensed within one year before the person's application, nor shall a person act as a contractor between the filing of the application and actual issuance of the license. The registrar may find any of those actions or circumstances to be excusable if there was reasonable doubt as to the need for licensure or the actions of the applicant did not result in an unremedied hardship or danger or loss to the public. A person who has been convicted of contracting without a license is not eligible to obtain a license under this chapter for one year after the date of the last conviction. For example, A.R.S. § 32-1154(A)(12) makes using contracts lacking specific verbiage illegal. For example, misdemeanor convictions and admissions by an applicant that they—despite a lack of convictions— regularly engage in felonious conduct.

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Ariz.App. 544, 534 P.2d 758 (1975); Security Insurance Co. v. Day, 6 Ariz.App. 403, 433 P.2d 54 (1967).

Kayetan v. License No. 37589, Class C-61, 116 Ariz. 99, 100, 567 P.2d 1228, 1229 (Ct. App. 1977); Westinghouse Elec. Corp. v. Rhodes, 97 Ariz. 81, 84, 397 P.2d 61, 64 (1964); Sobel v. Jones, 96 Ariz. 297, 300, 394 P.2d 415, 418 (1964). The ALJ’s interpretation leads to absurd consequences and prevents the Registrar from protecting consumers from unscrupulous and unqualified contractors. Under the ALJ’s interpretation, if the applicant himself admitted that he was of poor character and reputation, the Registrar would be barred from finding the applicant had poor character, unless he had committed one of the acts listed in § 32-1122(D). Under the ALJ’s interpretation, an applicant can commit numerous misdemeanor offenses indicating poor character and still get licensed to enter people’s homes or work on school job sites. For example, under the ALJ’s interpretation, an

applicant could be convicted of the following misdemeanor criminal acts and still get an ROC license: publicly exposing his genitals or making terrorist threats, public sexual indecency, living in a bordello, theft, assault, arson, cross burning, shoplifting, cockfighting, fraudulent use of a credit card, animal abuse, bootlegging, and illicit street racing.4 Indeed, because the ALJ’s interpretation requires not only commission of a felony, but

4 The list of misdemeanor crimes that are a reflection of character and reputation is lengthy: Indecent exposure (to person years of age or older). See A.R.S. § 13-1402. Public sexual indecency. See A.R.S. § 13-1403. Keeping or residing in house of prostitution. See A.R.S. § 13-3208. Prostitution. See A.R.S. § 13-3214. Arson of property (value of $100 or less). See A.R.S. § 13-1703. Unlawful burning of crosses. See A.R.S. § 13-1707. Unlawful imprisonment (if the victim is released voluntarily without physical injury). See A.R.S. § 13-1303. Theft. See A.R.S. § 13-1802. Shoplifting. See A.R.S. § 13-1805. Issuing a bad check. See A.R.S. § 13-1807. Intentionally or recklessly allowing a dog to wound or kill livestock. See A.R.S. § 3-1311. Selling horsemeat as beef. See A.R.S. § 3-2131. Cruelty to animals. See A.R.S. § 13- 2910. Presence at cockfight. See A.R.S. § 13-2910.04. Use of telephone to terrify, intimidate, threaten, harass, annoy or offend. See A.R.S. § 13-2916. Fraudulent use of a credit card. See A.R.S. § 13-2105. Usury. See A.R.S. § 13-2208. Misconduct involving weapons. See A.R.S. § 13-3102. Misconduct involving explosives. See A.R.S. § 13-3103. Misconduct involving weapons in a secured area of an airport. See A.R.S. § 13-3119. Operating or in actual physical control of a motorized watercraft while under the extreme influence of intoxicating liquor. See A.R.S. § 5-397. Attempt of a class 6 felony. See A.R.S. § 13-1001. Solicitation of a class 5 felony. See A.R.S. § 13-1002. Facilitation of a class 4 or felony. See A.R.S. § 13-1004. Endangerment (except involving a substantial risk of imminent death). See A.R.S. § 13- 1201. Threatening or intimidating. See A.R.S. § 13-1202. Assault by intentionally, knowingly or recklessly causing physical injury to another person. See A.R.S. § 13-1203. Assault by vicious animals at large (owner knows of propensity to attack). See A.R.S. § 13-1208. Receipt of anything of value obtained by fraudulent use of a credit card. See A.R.S. § 13-2103. Impersonating a public servant. See A.R.S. § 13-2406. Harassment. See A.R.S. § 13-2921. Sending or delivering a false or forged message. See A.R.S. § 13-3002. Benefiting from gambling. See A.R.S. § 13-3304. Betting and wagering violations. See A.R.S. § 13-3305. Possession, use, administration, acquisition, sale or manufacture of prescription-only drugs (certain violations). See A.R.S. § 13-3406. Use of certain dangerous drugs (class 4 felony, but court on motion of state and considering circumstances, may enter judgment of conviction for class 1 misdemeanor). See A.R.S. § 13-3407. Manufacture of counterfeit controlled substances and drugs. See A.R.S. § 13-3459. Contributing to delinquency or dependency of a child. See A.R.S. § 13-3613. Permitting life, health or morals of minor to be imperiled by neglect, abuse or immoral associations. See A.R.S. § 13-3619. Unlawful copying or sale of sounds or images from recording devices (less than 10 articles containing sound recordings or 10 articles containing audiovisual recordings) See A.R.S. § 13-3705. Dropping objects from overpass. See A.R.S. § 13-3720. Unlawful operation of a recording device with intent to record a motion Picture. See A.R.S. § 13-3723. Killing, wounding or possessing a jaguar. See A.R.S. § 17-320. Aggressive driving. See A.R.S. § 28-695. Racing on highways. See A.R.S. § 28-708. Driving or actual physical control while under the influence of intoxicating liquor or drugs. See A.R.S. § 28-1381. Driving or actual physical control while

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 conviction, an applicant could confess to the Registrar that he was a serial murderer, and the Registrar would be

barred from finding him of poor character and reputation until or unless he was convicted. This cannot be what the legislature intended in requiring an applicant to be of “good character and reputation.” The ALJ also failed to give deference to the Registrar’s own interpretation of § 32-1122(D). When the language of a statute is subject to various interpretations, an agency's interpretation of its own statute is entitled to “considerable deference by the judiciary.” Coppock v. Mundell, 1 CA-CV 12-0667, 2013 WL 3155836 (Ariz. Ct. App. June 20, 2013) (quoting Ariz. Water Co. v. Ariz. Dep't of Water Res., 208 Ariz. 147, 154–55, ¶¶ 30–31, P.3d 990, 997–98 (2004)). The Registrar has consistently interpreted § 32-1122(D) to allow the Registrar to determine character based on any probative evidence. The Registrar even published the guidelines it uses in evaluating the effect of

misdemeanor criminal convictions in the licensing context. See the Registrar’s Substantive Policy Statement 100, available at: http://www.azroc.gov/Acrobat/Lics/SPS%20100_Licensing%20Background%20Checks.pdf. 5 The Registrar’s interpretation is in harmony with both the letter and purpose of the statute and should have been given great deference. Nonetheless, the ALJ misinterprets the statute despite both the legislative intent and long standing interpretation by the Registrar.6 For all the above reasons, Conclusions of Law 1 and 2 of the ALJ’s Decision are without legal justification or support. Rejection of Conclusions of Law 1 and 2 are therefore not only justified, but required. II. A.R.S. § 32-1122(D) Requires that an Applicant Demonstrate Good Character and Reputation and the Burden of Proof Lies with the Applicant. The ALJ incorrectly placed the burden of proof on the Registrar to demonstrate that the applicant lacked good character and reputation. Pursuant to § 32-1122(D) the burden of proof is on an applicant to be of

under the extreme influence of intoxicating liquor. See A.R.S. § 28-1382. Trick or acrobatic flying or dropping objects over densely inhabited area. See A.R.S. § 28-8279. Operating or in actual physical control of an aircraft while under the influence (see section 28-8284). See A.R.S. § 28-8282. Operating or in actual physical control of an aircraft while under the influence (second violation within sixty months). See A.R.S. § 28-8287. Misuse or unlawful sale of lead-based paint. See A.R.S. § 36-1674. Unlawful abortion. See A.R.S. § 36-2152. Disturbing human remains or funerary objects (certain violations). See A.R.S. § 41-865. Impersonation of highway patrol or department of public safety officer. See A.R.S. § 41-1754. Sending threatening or anonymous letter to another. See A.R.S. § 13-3004. Reckless driving. See A.R.S. § 28- 693. The Registrar has also modified recent decisions by this ALJ to conform to the Registrar’s interpretation. See IN THE MATTER OF THE APPLICATION OF: Mega Air Inc., pending license No.K-39.285622-D No. 2014A-114-ROC; IN THE MATTER OF THE APPLICATION OF: Arizona Design and Remodel LLC, pending license No. 288043, No. 2014A-453- ROC. It is should be noted that other ALJs do not subscribe to this ALJ’s incorrect interpretation of § 32-1122(D). See e.g. IN THE MATTER OF THE APPLICATION OF: Arizona Luxury Pools and Landscapes LLC pending license Nos. B- 5287121-R and C-21.287123-R, No. 2013A-573-ROC, 8 (ALJ M. Douglas, Feb. 20, 2014) (§ 32-1122(D) gives the Registrar discretion to deny a license based upon lack of good character and reputation. The “discretion . . . allowed by the statute means an exercise of sound judgment based upon the application of reason and generally accepted principles of what constitutes good character or lack thereof to the facts presented in the case.”). Thus, ALJ E. Bryant’s interpretation of the Registrar’s licensing statutory scheme flies in the face of not only well settled principles of statutory construction, but also the interpretations of the Registrar and the other ALJs at the Office of Administrative Hearings.

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 “good character and reputation.” Further, the Administrative Procedures Act specifically places the burden in

an administrative hearing on a license denial on the applicant. See § 41-1092.07(G)(1). The ALJ acknowledged these authorities placing the burden on Applicant, but nonetheless assumed Applicant possessed good character and placed the burden on the Registrar to demonstrate that Respondent lacked good character and reputation. 7 There is no legal justification for the ALJ’s presumption of good character; no less than Oliver Wendell Holmes has stated as much. See Greer v. United States, 245 U.S. 559, 561, 38 S. Ct. 209, 210, 62 L. Ed. 469 (1918) (No presumption of good character for an accused in a federal case); Michelson v. United States, 335 U.S. 469, 475, 69 S. Ct. 213, 218, 93 L. Ed. 168 (1948). Decisions regarding bar applications confirm this rule of law carries through to the professional licensing context. See e.g. Application of Levine, 97 Ariz. 88, 91, 397

P.2d 205, 207 (1964) (“In Arizona, as a prerequisite to the admission to practice an applicant has the burden of establishing his good moral character.”); Application of Courtney, 83 Ariz. 231, 319 P.2d 991 (1957); In re Wilson, 76 Ariz. 49, 258 P.2d 433 (1953). Thus, the ALJ’s improper presumption of good character improperly shifted the burden to the Registrar without legal justification.8 The Registrar adopts the Administrative Law Judge's Recommended Order. Based on this Decision, the Order, as modified, shall become effective on September 15, 2014. IT IS SO ORDERED this 4th day of August, 2014 REGISTRAR OF CONTRACTORS /s/ Marc A. D’Amore Marc A. D’Amore Chief of the Legal Department

7 It is also of note that this ALJ incorrectly required the Registrar to present its case first at hearing on license denial matters, despite the applicant having the burden of proof, as he does in every license denial hearing involving the Registrar. 8 It must also be noted, that this ALJ’s interpretation regarding burdens is an aberration. Seemingly every other ALJ faced with the question, has found that the burden in a license denial action rested with the Applicant. See IN THE MATTER OF THE APPLICATION OF: Arizona Luxury Pools and Landscapes LLC pending license Nos. B-5287121-R and C- 21.287123-R, No. 2013A-573-ROC, 7 (ALJ M. Douglas, Feb. 20, 2014) (“Under A.R.S. § 41-1092.07(G)(1), in a hearing on a denial of a permit or a license, the burden is on the applicant.”); IN THE MATTER OF THE APPLICATION OF: Keep Cool AZ, Inc. pending license No. C-39.284948-R, No. 2013A-5275-ROC, 7 (ALJ Brian Brendan Tully, February 13, 2014) (“Pursuant to A.R.S. § 41-1092.07(G)(1), Applicant has the burden of proof in this matter.”); IN THE MATTER OF THE APPLICATION OF: Arizona Pools & Landscape LLC, pending license Nos. B-5.283693-R and K-21.284394-D, No. 2013A-2464-ROC, 6 (ALJ Tammy L. Eigenheer, August 14, 2013) (“Applicant bears the burden of proof to establish that it meets statutory qualifications for a contractor’s license by a preponderance of the evidence.”); IN THE MATTER OF THE APPLICATION OF: 3FC LLC, No. 2013A-2459-ROC, 12 (ALJ Diane Mihalsky, July 26, 2013) (“3FC LLC bears the burden of proof to establish that it meets statutory qualifications for a contractor’s license by a preponderance of the evidence.”).

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Copy mailed via USPS First Class mail this 4th day of August, 2014 to: Applicant BD Construction Unlimited AZ, Inc. 7950 E. Acoma Dr., Ste. 107 Scottsdale, AZ 85260-6963

AND copy electronically mailed this same date to:

Registrar’s Counsel Seth Hargraves, Esq., Assistant Attorney General Office of Administrative Hearings Eric Bryant, Administrative Law Judge Registrar’s License Department Lawrence Mathews, Chief of Licensing Case No. 2014-1576 /mkc

of 7 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762