FINACT2014A-453-ROC.pdf

2014A-453-ROC · Registrar of Contractors · 2014-07-18

BEFORE THE REGISTRAR OF CONTRACTORS OF THE STATE OF ARIZONA IN THE MATTER OF THE APPLICATION ) ) CASE NO: 2014-453 OF: ) Arizona Design and Remodel LLC ) ) DOCKET NO. 2014A-453-ROC Pending License No. 288043 ) ) RESPONDENT ) ORDER ) ) ) ) The Registrar adopts the attached Administrative Law Judge's (“ALJ”) Findings of Fact with the following modifications: On page 2, line 9 ½ delete “No felony convictions. . . .of the application.” On page 2 lines 26-28 ½ delete footnote 3. The Registrar rejects the attached Administrative Law Judge’s Conclusions of Law and instead

substitutes the following: “1. The burden of proof to meet the qualifications for licensure is on the applicant. See § 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. 4. Because character can change over time, if the Registrar successfully rebuts an applicant’s prima facie showing of good character and reputation, an applicant can show through rehabilitation, that the

applicant meets the good character requirement for licensure. 5. Here, the Registrar presented evidence of Applicant’s Qualifying Party’s criminal convictions for possession of drug paraphernalia and shoplifting sufficient to show that, despite applicant’s prima facie showing, applicant lacked good character and reputation. 6. However, Applicant presented evidence showing that one of the convictions was later set aside and the charges dismissed. Applicant further presented evidence showing that the other conviction, a felony,

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 resulted in probation that was terminated early by the court, and was subsequently designated a misdemeanor and set aside. Applicant further presented evidence showing that its Qualifying Party’s civil rights had been restored, including his right to possess firearms. 7. Applicant has successfully demonstrated its Qualifying Party’s rehabilitation such that

applicant meets the good character requirement for licensure.” Justification: Conclusion of Law Nos.1-6 are rejected because they proceed from two mistakes of law. First, the ALJ incorrectly construed A.R.S. § 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. § 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, “[w]ords and phrases shall be construed according to the 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). 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, A.R.S § 32- 1122(E).1 It stands to reason that if the legislature had intended the ALJ’s construction, it would simply have

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 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 added all of the items listed in § 32-1122(D) to Section (E) as it did with 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. As such, the ALJ’s

interpretation would render the requirement of an applicant to affirmatively establish good character and reputation superfluous. Such an interpretation cannot stand as the required showing of good character and reputation must be given meaning. See Arizona Dept. of Revenue, 218 Ariz. at 143, supra. Further support for this view 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. It is unreasonable to infer that these items3 were intentionally excluded from the calculus. Further, “[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

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)(13) 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 criminal conduct.

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 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. The ALJ’s interpretation improperly

reads the word “may” as “shall” or as “may only.” This is not what the legislature intended. Other principles of statutory construction also 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 state regulation of construction 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

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 that frustrate the statute’s purpose. Under the ALJ’s interpretation, if an applicant or the Registrar obtained affidavits from 100 separate individuals each attesting to the applicant’s poor character, and indeed even if the applicant himself admitted that he was of poor character, the Registrar would be barred from finding the applicant had poor character. Further, 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 get convicted of the following misdemeanor criminal acts and still get an ROC license: publicly expose his genitals, making terrorist threats, public bestiality, running a bordello, theft, assault, arson, cross burning, shoplifting, cockfighting, fraudulent use of a credit card, animal abuse, bootlegging, and illicit street racing.4 This cannot be what the legislature intended in requiring an applicant to be of “good character and reputation.”

The list of relevant misdemeanor crimes that are a reflection of character and reputation is lengthy: Indecent exposure (to person 15 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

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 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,

91 P.3d 990, 997–98 (2004)). The Registrar has consistently interpreted § 32-1122(D) not to limit the Registrar’s ability to determine character. The Registrar even published the guidelines it uses in evaluating the effect of 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. 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 recast the statute in disregard of both the legislative intent and long standing interpretation by the Registrar.

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 Intoxicated. See A.R.S. § 5-391.01. 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 5 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 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.

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 Despite all the above, the ALJ, without citation to any relevant legal authority or support, opined that the Registrar’s interpretation is “flawed” and “inconsistent” because under the Registrar’s interpretation, “a licensed contractor who is convicted of a misdemeanor could not have the license suspended or revoked, but could have a renewal application denied.” The ALJ’s tortuous interpretation is incorrect for all the reasons set

forth above and also because it fails to contemplate the difference between a vested and a non-vested property interest, and essentially conflates the denial of a license application with the suspension or revocation of a license. A denial of an application for a license, or a denial of an application for renewal of an expiring license, is simply not the same as a revocation of a license. An application for a license constitutes affirmative action by the applicant to obtain a property interest. See § 32-1125(B). A revocation on the other hand involves affirmative action by an agency to impair an existent property interest.5 While it is true that the Registrar cannot impair a license (an existing property interest) through the imposition of a suspension or revocation for misdemeanor convictions or other evidence of a lack of character and reputation not specifically iterated in § 32-1154(A), the licensee may not be able to renew an expiring

license or obtain a new license (an attempt to obtain a non-vested property interest) based on the circumstances concerning misdemeanor conviction. This is entirely consistent with the Registrar’s interpretation of the statutory scheme and follows legislative intent of the statutes at issue. A felony conviction is an elevated offense that the legislature determined of sufficient severity to impair a vested property right; conversely, the legislature did not deem a misdemeanor conviction similarly severe. Thus, while an applicant’s misdemeanor conviction, that is not also a violation of § 32-1154(A), cannot form the basis of a revocation or suspension action, it may be relevant to character and reputation such that denial of a new or renewal application is warranted. Any other interpretation, such as the ALJ’s, further renders superfluous the requirement of an applicant demonstrating good character and reputation at the point of initial licensure or at the time of applying

to renew an expiring license. See § 32-1122(D); see also § 32-1125(A). The plain language of the statute supports this view. Section 32-1122(D) only requires a licensee to affirmatively demonstrate good character and reputation when applying for a license or applying to renew a license that is about to expire; that is, before a vested property interest exists or just before it comes to its natural end. See § 32-1122(D) (“To obtain or renew a license under this chapter, each person shall be of good character and reputation.”). Had the legislature intended the ALJ’s interpretation, it would have imposed a continuing duty to maintain “good character and reputation” on a current licensee by including a provision in § 32-1154(A) specifically requiring it. This difference is acknowledged by the Arizona Administrative Procedures Act, A.R.S. § 41-1092.07(G)(2) places the burden on the agency in a revocation action taken “on its own initiative. . . .” Conversely the AAPA at § 41-1092.07(G)(1) explicitly puts the burden of proof to establish qualifications for licensure on an applicant for a new license, but the ALJ consistently ignores this explicit statute, without legal justification or citation to authority.

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762 For all the above reasons, the ALJ’s statements in footnotes 13 and 16 of the Recommended Order concerning the Registrar’s alleged “flawed” and “inconsistent” statutory interpretation are without legal justification or support, and directly contradicted by all the well settled authorities set forth above. Rejection of the ALJ’s Conclusions of Law 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 “good character and reputation.” The Administrative Procedures Act specifically places the burden in an administrative hearing on a license denial on the applicant. See § 41-1092.07(G). Without citation to any legal authority, the ALJ refuses to acknowledge the appropriate burden of proof. 6 There is no legal justification for a 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. The Registrar rejects the attached Administrative Law Judge’s Recommended Order in so far as it fails to recommend issuance of the license. Instead IT IS ORDERED that pending license no. 288043 be issued. Based on this Decision, the Order, as modified, shall become effective on August 26, 2014. IT IS SO ORDERED this 17th day of July, 2014 REGISTRAR OF CONTRACTORS /s/ Marc A. D’Amore ________________________________________ Marc A. D’Amore Chief of the Legal Department

Also, it is 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.

of 8 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 17th day of July 2014 to: Respondent Arizona Design and Remodel LLC 11795 W. Aster Dr. El Mirage, AZ 85335-2375 Mark Hanson, Esq. Schern Richardson Finter Decker, PLC 1640 South Stapley Dr. Suite 132 Mesa, AZ 85204 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. 2014-453 /mkc

of 8 REGISTRAR OF CONTRACTORS 1700 W. Washington St. Suite 105 – PHOENIX, AZ 85007-2812 Telephone (602)542-1525 1-877-692-9762