ALJDEC decisions subject to certification as final

2020A-04948-CPA-ROC · Registrar of Contractors · 2022-02-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arizona Registrar of Contractors,

COMPLAINANT,

v.

Ready Air LLC (Application No. [number redacted]),

&

Brigham Attaya Burton

dba Rockline Equity,

RESPONDENTS.

No. 2021A-02879-LDA-LS-ROC

No. 2020A-04948-CPA-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 29, 2021 and February 09, 2022.

APPEARANCES: Assistant Attorney General John Tellier, Esq. appeared on behalf of the Arizona Registrar of Contractors (“Registrar”) with Alex Figueroa and Chance Peterson as witnesses. Brigham Burton appeared on behalf of Ready Air LLC and Rockline Equity (“Respondents”) with Robert Bodine as a witness. Eric Ulinger observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Registrar.

FINDINGS OF FACT

Background and Procedure

On or about April 27, 2021, the Registrar received an application for CR-39 Air Conditioning and Refrigeration contracting licensure from Respondents, Application No. [number redacted].

Mark Robert Brimley (“Mr. Brimley”) was listed on the application as Respondent’s Qualifying Party/Member. Brigham Attaya Burton (“Ms. Burton”) was a signatory on the application as a Member and 75% owner.

Included Part 4: Disclosures of the application, Respondents answered “Yes” for Question #7 “Has any individual listed in Part 3: Persons of this application ever received a citation for, or been convicted of, contracting without a license in any state?” (Emphasis added.)

In the last section of the application, Part 6: Signatures, the following warning is issued as follows: By signing below, each person certified that the entire contents of this License Application Form, including all supplementary statements and materials attached, are true and correct, and that this application is not submitted with the intent to evade Chapter 10, Title 32 of the Arizona Revised Statutes. A.R.S. § 32-1154(A)(9). It is a violation of A.R.S. § 32-1154(A)(5) to make a misrepresentation of a material fact in obtaining a license. (Emphasis in original.)

In the Unlicensed Activity Disclosure Form attached to the application, Mr. Burton electronically signed the application; which included an admission that he had been disciplined by the Registrar for contracting without a license in Case No. 2020-04948 on April 01, 2021.

Mr. Burton received the following citations for unlicensed contracting activity from the Registrar:

On January 14, 2021, a Cease & Desist Order and Civil Citation was issued in Case No. 2020-04948, whereby a $92,500.00 civil penalty was assessed pursuant to Ariz. Rev. Stat. § 32-1166.01 for 37 alleged instances of unlicensed contracting committed by Mr. Burton between February 28, 2020, and July 27, 2020.

On August 12, 2020, the Registrar received a complaint about Mr. Burton’s business practices.

On October 19, 2020, the Registrar opened an investigation into the confirmable facts alleged in the complaint. Ultimately, the Registrar determined that Respondent, doing business as Cole Mechanical & Design LLC (“Cole Mechanical”); doing business as Drive Executives LLC, and Straface Mechanical Services Inc. (“Straface Mechanical”), acted as an unlicensed entity when Mr. Burton failed to obtain a contractor’s license in his name after purchasing businesses previously licensed by the Registrar (i.e. ROC License Nos. 174044 and 173153), and also failed to obtain a Qualifying Party for said assets while continuing to perform construction services that required a CR-39 license.

On June 10, 2021, the Registrar issued a Notice of License Denial (“Notice”) to Respondent for Application No. [number redacted] based on Ms. Burton’s alleged violations of Ariz. Rev. Stat. §§ 32-1122(C) and 32-1123(A). An appeal of the Notice was due on or before July 15, 2021.

On June 21, 2021, the Registrar received a timely appeal from Respondent.

On June 20, 2021, Registrar referred Case No. 2021-02879 to the Office of Administrative Hearings (“OAH”) for an independent evidentiary hearing on August 25, 2021.

On April 28, 2021, the Registrar referred Case No. 2020-04948 to OAH for an independent evidentiary hearing on May 24, 20201.

On July 15, 2021, the matters were consolidated and set for hearing on August 25, 2021, to determine whether grounds exist for the Registrar to deny Respondent’s application for licensure based on alleged violation(s) of Ariz. Rev. Stat. §§ 32-1122 and 32-1123, as established by the evidence, as well as to address Mr. Burton’s appeal of the Registrar’s civil penalty under Ariz. Rev. Stat. § 32-1166.01.

Hearing Evidence

The Registrar called Chance Peterson – Assistant Chief Counsel and Alex Figueroa – Investigator as witnesses, and submitted Exhibits 1-36. Respondents called Mr. Burton as a witness and submitted Exhibits 3-5, 9, and 14-16. The Notice of Hearing was admitted as its own exhibit. The substantive evidence of record is as follows:

Registrar’s Case

On August 12, 2019, Rockline Equity Partners LLC, through its President Mr. Burton, purchased Cole Mechanical. Notice was not provided to the Registrar. Per the purchase agreement, Mr. Burton also purchased the accounts receivable for the business.

Per the Arizona Corporate Commission, Mr. Burton is listed as the Manager for Drive Executives LLC and Rockline Equity LLC.

On March 10, 2020, Cole Mechanical purchased Straface Mechanical, doing business as Ready Air. Notice of change in ownership was not provided to the Registrar. Per the asset purchase agreement, Mr. Burton also purchased the use of company’s existing Qualifying Party and ROC License No. for 12 months.

Additional terms were also included as follows:

$25,000 of purchase price allocated for “Use of Qualifying Party License for 12 Months.”

“Business Assets” include “Customer lists (1700 customers of which 1400 have been active-buying customers in the last 3 years)” and all “licenses.”

“Seller will identify the names of clients and customers for Buyer ... for which Buyer is purchasing from the Seller.”

“[T]he term ‘Business Activity’ shall be defined as any HVAC installation, maintenance, or service work for residential and/or commercial properties.”

On June 10, 2020, the Registrar received an application to inactivate the license for Straface Mechanical, ROC License Nos.173153 and 173154. On July 23, 2020, the Registrar issued a notice to the business that it had approved the application.

Mr. Burton was never named on either license.

On an unknown date the Registrar received an application to inactivate the license for Cole Mechanical, ROC License No.174044. On December 16, 2020, the Registrar issued a notice to the business that it had approved the application.

On November 24, 2020, pursuant to a subpoena, Horizon Bank provided the Registrar with bank account information for activity posted February 01, 2020, through October 31, 2020, regarding deposit accounts held with the financial institution for Mr. Burton, Drive Executives LLC doing business as Ready Air, Rockline Equity Partners LLC, and Cole Mechanical.

The following $1,630,582.29 in deposits were made into Cole Mechanical’s bank account(s) from licensed entities:

$67,647.57 posted between March 25, 2020, and July 22, 2020, by Build Strategic LLC.

$838,578.91 posted between March 06, 2020, and July 24, 2020, by Bjerk Builders.

$124,241.46 posted between February 28, 2020, and July 06, 2020, by Stevens Leinweber Construction Inc.

$336,907.36 posted between March 04, 2020, and June 22, 2020, by MD Construction Inc.

$46,375.00 posted between March 11, 2020, and June 22, 2020, by Nitti Builders LLC.

$28,497.65 posted between February 28, 2020, and April 10, 2020, by Sonoran Crest.

$17,050.00 posted between March 06, 2020, and July 27, 2020, by Delta Construction Services LLC.

$32,231.40 posted between March 16, 2020, and June 08, 2020, by Ganem Construction LLC.

$16,440.00 posted between March 26, 2020, and April 27, 2020, by Paxton Construction LLC.

$2,333.00 posted between April 27, 2020, and July 20, 2020, by Concord General Contracting Inc.

$14,303.54 posted between April 27, 2020, and May 22, 2020, by RWI Construction Services LLC.

$18,456.40 posted between February 28, 2020, and June 29, 2020, by Southwest Architectural Builders Inc.

Cumulative total of $87,520.00 posted between February 28, 2020, and June 15, 2020, from various licensed entities.

The Registrar was also provided with a letter dated July 31, 2020, regarding the bank’s intention to close all accounts associated with Mr. Burton by August 31, 2020.

On January 27, 2021, Mr. Burton posted a job advert online that offered, in pertinent part, “For JUST the use of your CR-39 HVAC license as our qualified party, we budgeted 4300 per month + .01%-.02% of sales volume. Does this meet your expectations? If not, what did you have in mind for – no work – ONLY the use of your license?” (Emphasis and errors in original.) Another online ad noted that “No real ‘work’” was required for the position other than the “occasional quality inspection” if the applicant desired.

Respondents’ Case

On October 31, 2019, prior to the asset purchase, Mr. Burton asked the sellers of Straface Mechanical to contact the Registrar and “get the QP license to include Rockline Equity Partners, LLC.” (Error in original.)

On March 05, 2020, Mr. Burton asked the Registrar what forms needed to be submitted, if any, to “move a QP from his old entity ... over to a new entity?”

In January 2021 James Kepley was hired as Cole Mechanical’s Qualifying Party.

On January 13, 2021, the Arizona Corporate Commission approved Ready Air’s incorporation. Drive Executives LLC is listed as the Statutory Agent, at Mr. Burton’s attention.

In support of his eligibility for licensure by the Registrar, Mr. Burton provided multiple letters of recommendation regarding his character; specifically in support of his veracity, truthfulness, scrupulous business practices, and good character. Mr. Burton also provided his Arizona Real Estate Brokerage License, effective December 22, 2009, which is in good standing and renewed through December 31, 2023.

In closing, Mr. Burton denied that he ever contracted by a license, bid for a job, or performed any work. Mr. Burton argued that all checks at issue were made out to a properly licensed contractor, and opined that monies deposited in “unlicensed” accounts that he held do not constitute unlicensed contracting per his asset purchase agreement or any Arizona statute. Mr. Burton argued that because the Registrar did not identify which deposits, if any, were purchased per agreement versus created post close of escrow, it must be assumed that all accounts receivable deposits were legitimately purchased per agreement. Mr. Burton also argued that he was blamed, in error, as the seller of Cole Mechanical; the educated Qualifying Party for the license, had authority and control over the bank account(s) during the period the deposits at issue were made. Mr. Burton further opined that the $92,500.00 civil penalty levied against him was “ludicrous” and not supported by the record, particularly because is a Manager/Trustee and does not own Rockline Equity or Cole Mechanical. Mr. Burton opined that if a fine were to be assessed in this matter, it should be a $1,000.00 minimum, and imposed against the acting Qualifying Party at the time of the offense(s). Mr. Burton argued that the Registrar improperly denied Ready Air’s license denial, to the fatal detriment to the business. Still, should be granted so that an attempt may be made to resurrect the company to a viable state.

In closing, the Registrar argued that Mr. Burton set up LLCs which he used to purchase contractors’ licenses. The Registrar argued that in doing so, Mr. Burton expressly violated the law as those licenses were not transferable per Ariz. Rev. Stat. § 32-1124(B). The Registrar also argued that Mr. Burton failed to comply with Ariz. Rev. Stat. § 32-1151.01 because he did not immediately notify the Registrar about the majority change of ownership in Ready Air and Cole Mechanical. The Registrar further argued that Mr. Burton was never named on either company’s license after they were inactivated, though he remained in control of both businesses. The Registrar contended that Respondents’ 37 separate instances of unlicensed contracting occurred due to its acceptance of over $1.6M in accounts receivable payments, nearly 7 months after the close of escrow. The Registrar opined that it was not a conceivable way to run a business and that Mr. Burton had not provided an indicia of evidence to suggest the payment were legitimate and not for work performed without a valid license. The Registrar noted that grounds existed to deny Mr. Burton’s application for licensure because “good character” had not been established, as evidenced by his unlicensed contracting. The Registrar also noted that the amount of the civil penalty was within statutory guidelines, and had not been paid by Respondents.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and was properly brought before OAH for adjudication.

The Registrar bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. Respondent bears the burden to establish any affirmative defense(s) by the same evidentiary standard. Respondent also bears the burden to establish that it meets statutory qualifications for a contractor’s license by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that as 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.”

In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.” “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The legislature did not intend for the Registrar to deny a license application based solely on a technicality and in the face of evidence that the applicant is otherwise qualified.

Ariz. Rev. Stat. § 32-1121(A)(14), known commonly as the “handyman exception,” provides in pertinent part, that “[A]n unlicensed contractor may engage in work on a project for which the aggregate contract price, including labor, materials and all other items, is less than $1,000.00.”

Ariz. Rev. Stat. § 32-1122(C) provides, in pertinent part, that a lack of good character and reputation “may be established by showing that a person engaged in contracting without a license.”

Ariz. Rev. Stat. § 32-1123(A) provides the Registrar may not issue an entity a license for one year after the bid date, if the unlicensed entity bids on a contract for a project with an aggregate worth of more than $1,000.00.

Ariz. Rev. Stat. § 32-1124(B) provides, in pertinent part, that ““Licenses issued under this chapter ... [are] nontransferable.”

Ariz. Rev. Stat. § 32-1151.01 provides that “A corporation, association or other organization that is a licensed contractor shall immediately notify the registrar of any transfer of ownership of twenty-five percent or more of the stock or beneficial interest in the company.”

Ariz. Rev. Stat. § 32-1154(A)(5) precludes granting a license to an entity that has submitted a bid without a license within one year of the application.

Ariz. Rev. Stat. § 32-1166.01(C) provided that the Registrar may impose a civil penalty, not to exceed $2,500 for each violation, for each violation by a person who is required to be licensed and who does not possess the required license; except that the civil penalty may not exceed $2,500 for all violations committed on the same day.

The issue in this matter is whether grounds exist for the Registrar’s denial of Respondent’s application for licensure under Ariz. Rev. Stat. §§ 32-1122 and 32-1123, as well as to address Mr. Burton’s appeal of the Registrar’s $92,500.00 civil penalty under Ariz. Rev. Stat. § 32-1166.01.

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

As to the issuance of the civil penalty, the evidence of record establishes that Respondent completed license “transfers” in violation of Ariz. Rev. Stat. § 32-1124(B), and Respondent failed to provide notice of change in ownership to the Registrar in violation of Ariz. Rev. Stat. § 32-1151.01. The record also reflects that the accounts receivable deposits at issue occurred between March 25, 2020, and July 27, 2020, after Respondent purchased the business asset but prior to the related license(s) being deactivated by the Registrar. Here, the Registrar had authority to issue a Civil Citation to Respondent under Ariz. Rev. Stat. § 32-1166.01. The record, however, does not support the amount levied against Respondent for this first time offense. While Mr. Burton’s ignorance of the law is not an excuse for his actions, it is evidence of a lack of wanton or flagrant conduct on his part. To that end, the Registrar did not provide a reasonable justification for why it chose to levy the maximum penalty against Respondents. The public was not harmed or ever in jeopardy as a result of Mr. Burton’s or Ready Air’s conduct. Notably too, Respondents failed to establish that all 37 bank transactions at issue were valid accounts receivable deposits and not payments for unlicensed contracting work. Therefore, the fine(s) must be affirmed, but reduced.

As to the licensure denial, the evidence of record establishes that grounds exist for the Registrar to deny Respondent’s licensure application. Regardless of whether the accounts receivable deposits into “unlicensed bank accounts” constitute unlicensed contracting, the aforementioned statutory violations grant the Registrar authority to deny Respondents’ application for licensure.

Therefore, based on the credible substantive evidence of record the Tribunal concludes that the Registrar soundly denied Respondents’ application for CR-39 Air Conditioning and Refrigeration contracting license based on Ms. Burton’s violations of Ariz. Rev. Stat. §§ 32-1124(B) and 32-1151.01. The Tribunal also concludes that while the Registrar appropriately issued Respondents a Civil Citation for violation(s) of Ariz. Rev. Stat. § 32-1166.01, the amount of the fine(s) were disproportionate to the related conduct in light of the fact that no prior warnings being issue by the Registrar.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that the Registrar affirm the denial of Application No. [number redacted].

IT IS FURTHER RECOMMENDED that the Registrar modify the amount of the civil penalty in this matter from $92,500.00 to $18,500.00 in in Case No. 2020-04948 for violation of violation(s) of Ariz. Rev. Stat. § 32-1166.01

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 (5) days from the date of that certification.

Done this day, February 28, 2022.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors