ALJDEC decisions subject to certification as final

2019A-04302-LDA-ROC · Registrar of Contractors · 2019-12-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arizona Registrar of Contractors,

COMPLAINANT

Design Tree Maintenance Inc.

License No. [number redacted],

RESPONDENT

No. 2019A-04302-LDA-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: November 21, 2019

APPEARANCES: John Tellier, Esq. for the Registrar of Contractors; Robert Ludwig Kett and Anita Ann Kett for Respondent

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On September 10, 2019, the Registrar of Contractors (“ROC”) issued a Notice of License Denial Hearing setting the above-captioned matter for hearing on October 11, 2019 at the Office of Administrative Hearings in Phoenix, Arizona. The matter was continued and the hearing was conducted on November 21, 2019.

The issue for hearing is Design Tree Maintenance Inc.’s appeal of ROC’s denial of Design Tree’s application for licensure.

Robert Ludwig Kett, Design Tree’s president and qualifying party, and Anita Ann Kett, its vice-president appeared and testified for Design Tree. Mr. Kett and Ms. Kett are each 50% owners of the corporation.

ROC presented the testimony of Chance Peterson, its assistant chief counsel.

On July 5, 2019, Design Tree submitted an application for a CR 21 license. Mr. Kett and Ms. Kett each disclosed that they are associated with DTM Landscape Inc. that holds license number 216644 issued by ROC on February 11, 2006.

In response to the question asking whether the qualifying party was named on any other licenses that have been revoked or are currently suspended, Mr. Kett answered “no.”

ROC denied Design Tree’s application because it has a record showing that Mr. Kett was named as an owner of Robert Smith Development LLC license number 213846 that is suspended as a result of a recovery fund payout having been made against that license and because it found that Mr. Kett failed to establish good character and reputation by virtue of his failure to disclose that he had been named on the Robert Smith Development LLC license.

The recovery fund payout against license number 213846 was made through an Order dated May 21, 2009 in case number RF09-0447. As of the hearing date in this matter, the payout of $13,500.44 had not been repaid to the recovery fund.

Robert Smith was the qualifying party for license 213846.

Mr. Smith was DTM Landscape Inc.’s qualifying party from about 2005 or 2006 through 2008, but Ms. Kett was not sure of the exact dates. Mr. Smith was being paid as an employee.

ROC Exhibit 7 is an “Officer Change Form” filed with ROC by Robert Smith Development LLC on January 30, 2006. That form shows that Robert Jeffrey Smith is a member and 75% owner of the LLC and the qualifying party for license 213846, and that that Robert Ludwig Kett was a member and 25% owner of the LLC.

Robert J. Smith signed the form as “President” and his signature was notarized but was not taken under oath or affirmation (i.e., the notarial act was an acknowledgement, not a jurat). ROC’s Form also requires the notarized signature of the secretary, but that portion was left blank.

Mr. Kett and Ms. Kett both testified that they were unaware that Mr. Smith had named Mr. Kett as a member/owner of Robert Smith Development LLC.

ROC Exhibit 6 is Articles of Amendment for Robert Smith Development LLC adding Mr. Kett as a member of the LLC that was filed with the Arizona Corporation Commission on January 5, 2006. The amendment does not specify Mr. Kett’s percentage of ownership in the LLC.

Mr. Peterson testified to the effect that on receipt of an Officer Change Form, ROC’s procedure would be to verify that the members listed on that form were shown as members in the Corporation Commission’s records.

Design Tree’s Exhibit 3 (at pages 26 and 27) is Articles of Amendment for Robert Smith Development LLC removing Mr. Kett as a member of the LLC that was filed with the Arizona Corporation Commission on January 10, 2008. Robert J. Smith signed the Amendment form.

ROC’s Notice of License Denial shows that Mr. Kett was named on license number 213846 from January 30, 2006 to February 4, 2008. Mr. Peterson testified however that ROC had no record of Mr. Kett disassociating from license number 213846 and that in order to disassociate from a license a person must file with ROC a form for that purpose.

When ROC’s on-line licensing database is searched for Robert Kett, the only licenses that appear are numbers 216644 and 216951, both of which were issued to DTM Landscape Inc. License number 216951 expired in 2013.

When ROC’s licensing database is searched for license number 213846, no results appear.

When ROC’s licensing database is searched for Robert Smith Development LLC, five licenses appear, but none of these are Robert Smith Development LLC’s license number 213846 and none of the people named on these five licenses is Robert Smith.

When ROC’s licensing database is searched for Robert Smith, fourteen licenses appear, but none of these are Robert Smith Development LLC’s license number 213846, none of the people named on these fourteen licenses is Robert Smith, and DTM Landscape Inc. is not among these fourteen licensees.

When ROC’s licensing database is searched for Robert Jeffrey Smith, nine licenses appear, but none of these are Robert Smith Development LLC’s license number 213846, none of the people named on these nine licenses is Robert Smith, and DTM Landscape Inc. is not among these nine licensees.

The recovery fund payout against Robert Smith Development LLC’s license number 213846 was made to Roy and Suzan J. Bergman.

ROC’s Exhibit 10 is an Administrative Law Judge Decision issued on July 7, 2008 in three matters that were consolidated for hearing. The Complainants in all three matters were the Bergmans; Respondents were DTM Landscape Inc. (docket number 07F-M1377X-ROC), Robert Smith Development LLC’s license number 213846 (docket number 07F-M1377-ROC), and Robert Smith Development LLC’s license number 218066 (docket number 07F-M1377W-ROC).

DTM Landscape Inc. was found to have been improperly named as a Respondent and the complaint against it was dismissed, the complaint against Robert Smith Development LLC’s license number 218066 was also dismissed, and Robert Smith Development LLC’s license number 213846 was suspended.

At the hearing Mr. Kett and Ms. Kett were confused as to why Design Tree’s application was denied. Mr. Kett had been under the impression that the denial was based on DTM Landscape Inc.’s involvement in the complaints filed by the Bergmans and it was only during the course of the hearing that he became aware that the reason for the denial was ROC’s determination that he had been named on Robert Smith Development LLC’s license number 213846.

CONCLUSIONS OF LAW

Design Tree bears the burden of persuasion. Ariz. Rev. Stat. § 41-1092.07(G)(1).

A party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119.

A preponderance of the evidence is:

The greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995).

Ariz. Rev. Stat. § 32-1122(C) provides that:

To obtain, renew or maintain a license under this chapter, each person who is named on a license must be of good character and reputation. Lack of good character and reputation may be established by showing that a person 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 license that was suspended or revoked in this state or another state.

Ariz. Rev. Stat. section 32-1139(B) provides that:

If any amount is paid from the [recovery] fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent a year. Any person who is or was, at the time of the act or omission, named on a license that has been suspended because of a payment from the recovery fund is not eligible to receive a new license or retain another existing license that also shall be suspended by operation of law, nor shall any suspended license be reactivated, until the amount paid from the fund is repaid as provided in this subsection.

Ariz. Rev. Stat. section 32-1154(A) provides that:

The holder of a license or any person named on a license pursuant to this chapter may not commit any of the following acts or omissions:

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5. Misrepresentation of a material fact by the applicant in obtaining a license.

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20. Having a person named on the license who is or was named on any other license in this state or in another state that is under suspension or revocation for any act or omission that occurs while the person is or was named on the license unless the prior revocation was based solely on a violation of this paragraph.

As pertinent to this matter, the qualifying party for a licensee may act in the capacity of the qualifying party for one additional licensee only if there is a common ownership of at least twenty-five per cent of each licensed entity for which the person acts in a qualifying capacity. Ariz. Rev. Stat. § 32-1127.

The preponderance of the evidence shows that Mr. Kett was not aware that Mr. Smith had named him as a member of Robert Smith Development LLC’s license number 213846. Consequently, there is insufficient evidence to show that Mr. Kett violated Ariz. Rev. Stat. section 32-1154(A)(5).

Although ROC’s Exhibit 7 shows that Mr. Kett was a 25% owner of Robert Smith Development LLC’s license number 213846, ROC’s on-line database does not have information showing that Mr. Kett was named on that license. There was no evidence adduced showing that Mr. Kett consented to Mr. Smith’s filing with ROC the Officer Change Form naming Mr. Kett as an owner. There was also no evidence adduced showing that Mr. Kett consented to Mr. Smith’s filing with the Corporation Commission the two Amendments at issue (the first naming Mr. Kett as a member of the LLC and the second, unilaterally removing him as a member) . In addition, Mr. Kett and Ms. Kett each provided credible testimony showing that they were unaware that Mr. Smith had filed with ROC or the Corporation Commission paperwork showing that Mr. Kett was a member of the LLC.

Considering these facts, particularly that it has not been shown that Mr. Kett consented to being named on license number 213846, it would be an unfair and unreasonable interpretation of the statutes to conclude that Mr. Kett is a person named on a license that has been suspended or revoked. Consequently, there is insufficient evidence to show that Mr. Kett violated Ariz. Rev. Stat. section 32-1154(A)(20) and insufficient evidence to show that section 32-1139(B) is a bar to Design Tree being licensed.

Design Tree Maintenance Inc. has presented sufficient evidence to show that ROC’s decision to deny its application for licensure should be reversed.

RECOMMENDED ORDER

IT IS RECOMMENDED that ROC’s Notice of License Denial issued to Design Tree Maintenance Inc. be rescinded.

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 is forty days after the date of that certification.

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-137160-45720000Done this day, December 11, 2019.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000