ALJDEC decisions subject to certification as final

2017A-3653-LDA-ROC · Registrar of Contractors · 2017-11-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

IN THE MATTER OF THE APPLICATION OF:

2 Hawks Designs LLC dba,

Two Hawks Design & Build,

PENDING LICENSE NO: 313970

No. 2017A-3653-LDA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 6, 2017

APPEARANCES: Tom Raine, Attorney for the Registrar of Contractors; Steve Beeghley, Attorney for Applicant; Arash Hoss and Dan Wilhoit, Respondent’s representatives; Bonny Allan, Laurie Swanson, Brian Kirby, witnesses, Shaquira Adebule, observer

ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang

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After appealing the Registrar of Contractors’ proposed license denial, Respondent offered sufficient additional evidence at hearing to warrant reconsideration and grant the license. Although Respondent received two citations for contracting without a license, the evidence shows that Respondent made a good faith effort to work under a licensed general contractor in both cases and, in one case where Respondent did become involved in controlling the building funds, its motives indicate that it was done out of a desire to protect the homeowner from loss due to the general contractor’s bankruptcy.

FINDINGS OF FACT

On or about May 22, 2017, Applicant, 2 Hawks Designs, LLC, applied for a contracting license from the Registrar of Contractors. The Registrar denied the application on the grounds that a member of Applicant had contracted without a license. Applicant filed an appeal from that denial and the matter was set for hearing at the Arizona Office of Administrative Hearings, an independent hearing agency.

At the hearing, the Registrar of Contractors offered evidence that Arash Hoss, a part owner of Respondent, had been issued 2 citations for contracting without a license. Although the Registrar of Contractors admitted that it encourages unlicensed contractors to obtain a license, it must also ensure that applicants have the requisite good character to hold a license. Because there were 2 citations against Mr. Hoss, the Registrar of Contractors denied Applicant’s application on the grounds that this indicated a pattern of contracting without a license.

Arash Hoss testified that he starting working in the construction business by buying and flipping houses. He then went into building spec homes, of which he completed about 20. Regarding the first citation, he said Respondent planned to build a spec home and the people who ultimately filed a complaint against Respondent were interested in it. They decided to buy another piece of land but Respondent was involved in designing it. In her complaint, the homeowner alleged that Ashton Builders was Respondent’s subcontractor. The contract between the parties identifies Respondent as “Builder” but also states that the parties understand that Ashton Builders, identified as the “Contractor” was the licensed general contractor on the project. Mr. Hoss testified that it was the homeowner’s attorney who drafted the contract. He said that Ashton Builders was the licensed contractor on both of the projects for which Respondent received a citation.

Mr. Hoss testified that regarding the second citation, Ashton Builders was also on the contract and entered a separate contract with the homeowner as well. He said Respondent designed the home and was at the property regularly but did not build it. Nevertheless, he acknowledged that when Ashton Builders was having financial problems, Respondent tried to protect the homeowner by getting involved in controlling the funds. Mr. Hoss stated that he was not aware at the time that controlling the funds is contracting without a license. He also said Respondent paid subcontractors out of its own pocket amounting to $60,000, and the homeowner refused to reimburse the money. Respondent wants to get that citation reversed.

Mr. Hoss stated that he wants to get a license in order to avoid problems with general contractors in the future.

Respondent’s attorney argued that, while Respondent may have a record of two instances of contracting without a license, the circumstances indicate that Respondent’s members have good character.

CONCLUSIONS OF LAW

This hearing was conducted in accordance with Arizona Revised Statutes (“A.R.S.”) § 41-1092.01 et seq. Complainant has the burden of proof and the standard of proof on all issues is by a preponderance of the evidence. See Arizona Administrative Code (“A.A.C.”) R2-19-119.

A.R.S. § 32-1122(C) provides as follows pertaining to the Registrar of Contractors:

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.

The Registrar of Contractors argued that “builder” is defined in A.R.S. § 32-1101(A)(3) as being synonymous with the term “contractor”. However, when a term is defined within a contract, it signifies how that term is to be understood when reading or interpreting the contract. Such separately defined terms are specifically intended to carry a certain meaning within the contract that do not necessarily equate to the commonly understood definition of the same word. Therefore, by using the separately defined word “Builder” in the contract, Respondent was not necessarily holding itself out as a builder as that word is defined in the statute.

Respondent’s attempts to utilize a general contractor with a license are not disputed and indicate that Respondent was trying to follow Arizona law. While its attempts may not have protected Respondent from stumbling into a violation, the circumstances of the violations do not indicate a pattern of disrespect for Arizona’s contracting laws or lack of good character.

While the initial denial by the Registrar of Contractors was founded upon a logical deduction given the available facts at the time, the evidence that came to light at the hearing justifies reconsideration of that decision. Respondent appropriately sought to use a licensed general contractor. When that contractor started to be insolvent, Respondent took actions that, while a violation of the statute, were intended to protect the homeowner from loss. Respondent was not aware that its action in paying subcontractors and controlling funds was a violation at the time. Respondent is aware of the fact now. But the fact that Respondent was willing to take action to protect a homeowner and to risk its own funds in the bargain is a clear indication of good character. In response to the problems Respondent was having with its general contractor, Respondent took the proper action by applying for a license of its own.

RECOMMENDED DECISION

Based on the foregoing considerations, the undersigned Administrative Law Judge hereby recommends that Respondent’s appeal be sustained and that the Registrar of Contractors approve Respondent’s license application.

Done this day, November 21, 2017.

/s/ Dorinda M. Lang

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors