ALJDEC decisions subject to certification as final

2014A-453-ROC · Registrar of Contractors · 2014-06-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 27, 2014

APPEARANCES: Arizona Design and Remodel, LLC appeared through attorney Mark Hanson, accompanied by Member and proposed Qualifying Party Dave McDonald; the State of Arizona, Registrar of Contractors, was represented by Assistant Attorney General Seth Hargraves and ROC Chief of Licensing Lawrence Matthews.

WITNESSES: For Applicant: Dave McDonald

For the ROC: Lawrence Matthews, Chief of ROC Licensing

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Arizona Design and Remodel, LLC (“Applicant”) appeals the Arizona Registrar of Contractors’ (“ROC” or “Registrar”) denial of its application for a contracting license. The ROC based the denial upon finding that Applicant’s sole Member and proposed Qualifying Party lacks good character and reputation. The ROC found lack of good character and reputation based on two misdemeanor convictions of the sole Member and proposed Qualifying Party. Applicant requested a hearing to challenge the denial. At hearing, this tribunal entered marked Exhibits 1 through 8 from the ROC, and Applicant’s Exhibits A through J. The parties presented evidence and testimony from the witnesses listed above. Based on the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommend Order finding that the ROC does not have legal grounds to deny Applicant’s application. FINDINGS OF FACT 1. On September 25, 2013, Applicant applied for a Class K-61 carpentry contracting license with the ROC.[1] On January 31, 2014, the ROC issued a letter (hereinafter “denial letter”) denying the application for two listed reasons as follows: 1. David Paul McDonald has failed to establish good character and reputation in contravention of A.R.S. §§ 32-1122.D.

2. David Paul McDonald was convicted of a felony in contravention of A.R.S. § 32-1154.A.8.

The specific facts upon which the ROC relies for the denial are explained in the next pages of the application denial letter and only refer to two misdemeanor convictions of David Paul McDonald (“McDonald”).[2] No felony convictions are cited as bases for denial of the application.[3] 2. Applicant submitted criminal court records to the ROC. In addition, the ROC requested records from several courts. Criminal court records that were received, and relied upon for denial, are found in Exhibits 4 and 5. Other criminal court records are found in Applicant’s Exhibits C through H. The Administrative Law Judge has carefully reviewed those records, and finds the following facts: a) In May 2010, McDonald was convicted of misdemeanor shoplifting and sentence to one year of probation by the Surprise City Court.[4] The Judgment of Guilt was later set aside and the charges dismissed in February 2014 by the Court.[5] b) In October 2011, McDonald was convicted in Maricopa County Superior Court of Possession of Drug Paraphernalia, a class 6 undesignated felony, and sentenced to 18 months probation.[6] Probation was terminated early in July 2012 by the Court, the offense was designated a misdemeanor and set aside, and McDonald’s civil rights were restored.[7]

3. In summary, the record shows the two misdemeanor convictions described above, both of which were set aside after brief terms of probation. 4. Applicant submitted several Exhibits to show rehabilitation of McDonald. First, McDonald voluntarily took a drug test in May 2011, providing a hair sample to be tested.[8] It showed no evidence of drug use. In addition, McDonald took Community College classes in 2011 and 2012.[9] CONCLUSIONS OF LAW 1. Applicant must show that it meets the qualifications for licensure.[10] One of those qualifications is that persons named on a license be persons of good character and reputation.[11] By statute, lack of good character and reputation may be established by showing (1) that a person has engaged in contracting without a license, or (2) that a person has committed any act that, if committed by a licensee, would be grounds for disciplinary action against a licensee, or (3) that a person has been named on a contractor’s license that was suspended or revoked in another state.[12] For the reasons stated below, Applicant has shown good character and reputation for McDonald by showing that there are no legal grounds to find a lack of good character and reputation.[13] 2. The ROC statute that controls this case, A.R.S. § 32-1122(D), requires each person on a license to be of “good character and reputation.” It then states that lack of such good character and reputation may be established by showing that a person has acted within one of the three categories of prohibited actions, as stated above. Because there is no party other than an applicant and the ROC involved in an application for a contractor’s license, the plain meaning of the statute is that, if there is any lack of good character to be shown, the ROC must allege lack of good character and reputation by alleging that the person has committed at least one action within one of the three statutory categories. While the ultimate burden of showing qualification for licensure remains on an applicant,[14] the ROC must allege and go forward with any evidence concerning lack of good character and reputation.[15] And then, if there are grounds and since character can change over time, it is incumbent upon an applicant to show rehabilitation of the person’s character in order to show that an applicant meets the good character requirement for licensure. 3. Here, the ROC alleged lack of good character based on misdemeanor convictions. However, only felony convictions are grounds for showing lack of character as stated in A.R.S. § 32-1122(D), and as in A.R.S. § 32- 1154(A), which is incorporated into A.R.S. § 32-1122(D by reference and contains grounds for suspension or revocation of a licensed contractor. There are no grounds for disciplining a licensed contractor in A.R.S. § 32- 1154(A) for a misdemeanor conviction. Therefore, the statutes do not allow denial of an application for such conduct either.[16] 4. At hearing, the ROC presented evidence of only misdemeanor convictions. The Administrative Law Judge finds such evidence to be irrelevant to Applicant’s qualification for licensure. The ROC argues that such convictions are relevant to determining good character and reputation. But that argument is wrong in the context of the ROC statutes. The phrase “good character and reputation” is not separately or explicitly defined in the ROC statutes, as other terms such as “person” are defined in A.R.S. § 32-1101 or elsewhere. However, the phrase is defined implicitly by A.R.S. § 32-1122(D) when it states that lack of good character and reputation can be shown in three ways. By stating it in that fashion, the statute defines good character and reputation by what it is not rather than by what it is. The statute does not allow lack of good character and reputation to be shown by misdemeanor convictions because those convictions are not included within the domain of “lack of good character and reputation” in A.R.S. § 32-1122(D). For that reason, misdemeanor convictions are not relevant. The ROC’s attempt to show lack of good character and reputation due to misdemeanor convictions is not authorized by the statute. 5. Nothing in the record presented at hearing shows that McDonald lacks good character and reputation as defined in A.R.S. § 32-1132(D). There is no evidence that he has engaged in contracting without a license, committed one of the actions for which discipline can be imposed in A.R.S. § 32-1154(A), or was named on a license in another state that was suspended or revoked. Thus, there are no legal grounds that establish lack of good character and reputation. 6. Applicant has shown that the persons on the pending license application are persons of good character and reputation. The ROC has not alleged legal grounds for concluding otherwise. RECOMMENDED ORDER IT IS RECOMMENDED that the Registrar of Contractors find that Arizona Design and Remodel, LLC is qualified for Pending License No. K-61.288043-D.

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 5 days from the date of that certification.

Done this day, June 16, 2014.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibit 2. [2] Exhibit 1. [3] A.R.S. § 41-1092.03(A) requires the ROC to allege facts with “reasonable particularity” when it denies an application. Because no felony convictions are alleged in the denial letter, such convictions cannot be used as grounds for denial. Neither are there facts alleged by the ROC in the denial letter that relate to statutory grounds for any other allegation of “lack of good character” other than the misdemeanor convictions. Therefore, based on the denial letter, the only possible grounds for denial of Applicant’s application is lack of good character based on the two misdemeanor convictions alleged and cited. [4] Exhibit 4. [5] Exhibits G and H. [6] Exhibit 5. [7] Exhibits C, D, E, and F. [8] Exhibit B. [9] Exhibit J. [10] Arizona Revised Statutes (A.R.S.) § 41-1092.07(G)(1). [11] A.R.S. § 32-1122(D). [12] Id. The entire paragraph states:

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.

[13] The ROC argues that it may deny an application based on factors other than those stated in the statute, such as misdemeanor convictions, and apparently reads the second sentence of A.R.S. § 32-1122(D) as meaning “Lack of good character and reputation may be established by showing[, among other things,] that a person . . .” has committed one of the three categories of prohibited actions. This is not a natural reading of the text. It is a reading forced on the text by the ROC. The most natural reading is “Lack of good character and reputation may [or may not] be established by showing that a person . . .” has committed one of the three categories of prohibited actions. This is the interpretation that the Administrative Law Judge gives the text. This interpretation does not allow other factors than those stated to be grounds for denial. It merely allows that lack of character and good reputation, if it is to be shown, be shown based on specified factors. [14] A.R.S. § 41-1092.07(G)(1). [15] In other words, the applicant bears the burden of persuasion for showing qualifications for licensure, but the ROC bears the burden of going forward with evidence for lack of good character and reputation. [16] Under the ROC’s flawed reading of the statutes, a licensed contractor who is convicted of a misdemeanor could not have the license suspended or revoked, but could have a renewal application denied. This is inconsistent and not what the Legislature intended.

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