ALJDEC decisions subject to certification as final

2015A-1738-ROC · Registrar of Contractors · 2015-07-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 24, 2015, at 1:00 p.m. APPEARANCES: The Arizona Registrar of Contractors (“the Registrar”) was represented by John R. Tellier, Esq., Assistant Attorney General; Joseph Edward Burud DBA: Bothers Tile and Stone (“Respondent”) appeared on his own behalf. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT 1. The Registrar issued License No. CR48.081646-D to Respondent. 2. On or about September 23, 2009, the Registrar issued a Citation and Complaint against Respondent’s license in property owner Joseph W. McNeil’s complaint in Case No. 09-5685.[1] The Citation and Complaint charged Respondent with having violated A.R.S. § 32-1154(A)(18)[2] and (23),[3] as well as other contracting statutes. 3. On or about January 15, 2010, after Respondent failed to file a timely written answer to the Citation and Complaint in Case No. 09-5685, the Registrar issued a Decision and Order, finding that pursuant to A.R.S. § 32-1155(B),[4] Respondent was deemed to have admitted the charges contained in the Citation and Complaint.[5] Pursuant to A.R.S. § 32- 1154(D),[6] the Decision and Order imposed a $500.00 civil penalty for Respondent’s violation of A.R.S. § 32-1154(A)(23) (now A.R.S. § 32- 1154(A)(22)) and pursuant to A.R.S. § 32-1154(E),[7] the Decision and Order imposed a $1,500.00 civil penalty for Respondent’s violation of A.R.S. § 32-1154(A)(18) (now A.R.S. § 32-1154(A)(17)). 4. On or about February 22, 2010, Respondent filed a document entitled Written Answer to the Citation and Complaint in Case No. 09-5685, alleging that the penalties were excessive and that the decision was not justified by the evidence.[8] The Registrar determined to treat the document that Respondent filed on February 22, 2010, as a request for rehearing. On or about May 4, 2010, the Registrar sent a letter to Respondent informing him that because the January 15, 2015 default Decision and Order provided Respondent with an opportunity to file a request for rehearing on or before February 19, 2010, Respondent’s February 22, 2010 request was untimely and the January 15, 2015 Order would be put into effect immediately.[9] 5. Respondent failed to appeal the Registrar’s Decision and Order to superior court or to pay the civil penalties assessed in Case No. 09- 5685. 6. On or about March 5, 2015, the Arizona Department of Revenue (“the Department”) informed the Registrar that a state income tax refund was due to Respondent. The Registrar confirmed that the taxpayer who was entitled to the income tax refund was Respondent.[10] 7. On or about March 9, 2015, the Registrar filed a Notice of Intent under the Department’s Debt Setoff Program addressed to Respondent, stating that under A.R.S. § 42-1122, his $342.00 Arizona income tax refund may be applied to satisfy his $1,500.00 outstanding debt to the Registrar.[11] The letter informed Respondent that he had the right to appeal the intended setoff within 30 days of the date of the letter. 8. On or about April 9, 2015, the Registrar received Respondent’s appeal of the intended setoff.[12] 9. Although Respondent’s appeal was untimely, in the interest of justice, the Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. 10. A hearing was held on June 24, 2015. The Registrar submitted seven exhibits and presented the testimony of Adam Stafford, its Assistant Chief Counsel, to establish the facts set forth above. 11. Respondent testified on his own behalf. Respondent stated that he had filed for bankruptcy since the Registrar’s final Decision and Order in Case No. 09-5685 and that his state income tax refund was community property. Respondent did not present any evidence to establish that the civil penalties imposed in Case No. 09-5685 had been discharged in Respondent’s bankruptcy or present any legal analysis that a state agency could not use community property to setoff a sole proprietor’s debt. Respondent also attempted to argue that the civil penalties assessed in Case No. 09-5685 were excessive. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[13] The Registrar bears the burden of proof to establish its right to use Respondent’s state income tax refund to setoff a portion of his outstanding debt to the Registrar by a preponderance of the evidence.[14] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[15] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[16] A.R.S. § 42-1122 concerns setoffs for debts to state agencies, political subdivisions, and courts, and provides in relevant part: A. The [Department] shall establish a liability setoff program by which refunds under sections 42-1118 and 43-1072 may be used to satisfy debts that the taxpayer owes to this state, a political subdivision or a court. The program shall comply with the standards and requirements prescribed by this section. . . . .

C. The [Department] shall match the information submitted by the agency, political subdivision or court by at least two items of identification of the taxpayer with taxpayers who qualify for refunds under § 42-1118 and:

1. Notify the agency, political subdivision or court of a potential match, the taxpayer’s home address and any additional taxpayer identification numbers used by the taxpayer. . . . . . . .

E. On confirmation pursuant to subsection C, paragraph 2 of this section, the agency or political subdivision shall notify the taxpayer, by mail to the most recent address provided by the taxpayer to the department:

1. Of the intention to set off the debt against the refund due.

2. Of the taxpayer's right to appeal to the appropriate court, or to request a review by the agency or political subdivision pursuant to agency or political subdivision rule, within thirty days of the mailing of the notice. . . . .

G. The basis for a request for review as provided by subsection E of this section shall not include the validity of the claim if its validity has been established at an agency hearing, by judicial review in a court of competent jurisdiction in this or any other state or by final administrative decision and shall state with specificity why the taxpayer claims the obligation does not exist or why the amount of the obligation is incorrect.

The Registrar established that Respondent has an outstanding debt to the Registrar in the aggregate amount of $1,500.00 for the civil penalties assessed in Case No. 09-5685 under A.R.S. § 42-1122(A) and that it provided the notice to Respondent of the intended setoff required by A.R.S. § 42- 1122(E). Under A.R.S. § 42-1122(G), Respondent is not allowed to argue that the civil penalties were excessive. Because Respondent did not establish any affirmative defense, the Registrar established its right to Respondent’s state income tax refund to setoff against the civil penalties assessed on Case No. 09-5685. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar affirm the finding that under A.R.S. § 42-1122, the Registrar is entitled to Respondent Joseph Edward Burud DBA: Brothers Tile and Stone’s income tax refund to setoff the civil penalties that were imposed against his License No. CR48.081646-D in Case No. 09-5685. 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 five days from the date of that certification. Done this day, July 13, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] See the Registrar’s Exhibit 3. [2] Former A.R.S. § 32-1154(A)(18) included among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[c]ontracting or offering to contract or submitting a bid while the license is under suspension or while the license is on inactive status.” A.R.S. § 32-1154(A)(18) has been renumbered as A.R.S. § 32- 1154(A)(17). [3] Former A.R.S. § 32-1154(A)(23) included among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” A.R.S. § 32-1154(A)(23) has been renumbered as A.R.S. § 32-1154(A)(22). [4] A.R.S. § 32-1155(B) provides as follows: “Failure of the licensee to answer within ten days after service shall be deemed an admission by the licensee of the licensee's commission of the act or acts charged in the complaint, and the registrar may then suspend or revoke the licensee's license.” [5] See the Registrar’s Exhibit 4. [6] Former A.R.S. § 32-1154(D) provided as follows: The registrar may impose a civil penalty of not to exceed five hundred dollars on a contractor for each violation of subsection A, paragraph 22 of this section. Civil penalties collected pursuant to this subsection shall be deposited in the residential contractors' recovery fund. The failure by the licensee to pay any civil penalty imposed under this subsection results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty. No future license may be issued to an entity consisting of a person, as defined in section 32-1101, subsection A, paragraph 6, who is associated with the contractor, unless payment of any outstanding civil penalty is tendered. This section has been renumbered as A.R.S. § 32-1154(E). [7] Former A.R.S. § 32-1154(E) provided as follows: The registrar shall impose a civil penalty of not to exceed one thousand dollars on a contractor for each violation of subsection A, paragraph 17 of this section. Civil penalties collected pursuant to this subsection shall be deposited in the residential contractors' recovery fund. The failure by the licensee to pay any civil penalty imposed under this subsection results in the automatic permanent revocation of the license thirty days after the effective date of the order providing for the civil penalty. No future license may be issued to an entity consisting of a person, as defined in section 32-1101, subsection A, paragraph 6, who is associated with the contractor, unless payment of any outstanding civil penalty is tendered. A.R.S. § 32-1154(E) has been renumbered as A.R.S. § 32-1154(F). [8] See the Registrar’s Exhibit 4. [9] See the Registrar’s Exhibit 6. [10] See the Registrar’s Exhibit 7. The Registrar’s case log also reflected the Registrar’s employee Lisa Meadows’ March 12, 2015 note that “civil penalties ARE NOT dischargeable in a BK.” [11] See the Registrar’s Exhibit 1. [12] See the Registrar’s Exhibit 2. [13] See A.R.S. § 32-1101 et seq. [14] See A.R.S. § 41-1092.07(G)(3); A.A.C. R2-19-119(A) and A.A.C. R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [15] See A.A.C. R219-119(B)(2). [16] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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